Kidnapping and extortion: how does insurance work?

Kidnapping and extortion: how does insurance work?

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While relatively rare in Australia, when someone is kidnapped or detained, it hits the headlines for all the wrong reasons.

For instance, few will forget the so-called ‘Mosman bomb hoax’ in 2011, when an apparent collar bomb and letter demanding money was placed around school girl Madeleine Pulver’s neck. The man responsible carried out the crime to intimidate the victim’s father. The bomb was later found to be fake.

While this is an extreme example, in the past, there have been other instances of Australian executives being extorted or kidnapped in remote parts of the world. One source estimates there are about 15,000 kidnappings every year, with about US$500 million paid out in ransoms.

Many Australian businesses, for instance mining and resources, engineering and consulting firms, have staff either living in high-risk locations overseas or travelling to high-risk locations. It’s important for these firms to have kidnapping and extortion cover in place to help protect staff and so in the event the worst happens, they have resources to secure a positive outcome.

This type of insurance can provide protection against financial losses incurred when someone covered by the policy is kidnapped, extorted or illegally detained, either in Australia or overseas. It gives businesses with staff located in risky places peace of mind their staff will in the best possible hands should they be held against their will or extorted.

Kidnap and ransom insurance is typically an add-on to management liability insurance and whilst they do cover the cost of a ransom, what you are really buying when you take out this insurance is access to people whose expertise is being able to deal with the people who have kidnapped you to try to get you released, which is a highly-specialised skill.

So if you’re taking out kidnapping and ransom insurance, be sure to check how much cover the policy includes for specialised negotiators. It’s also a good idea to do some due diligence on the consultants the insurer employs to negotiate the release of hostages.

Find out about their experience successfully negotiating the release of hostages and also whether they have been able to secure the release of hostages without the need to pay a ransom.

Additionally, some policies will have exclusions for the very countries in which it’s advisable to have kidnapping insurance. These may include hot spots such as Algeria, Colombia, Georgia, India, Indonesia, Iraq, Israel, Malaysia, Pakistan, Peru, the Philippines, Russia, Sri Lanka, Tajikistan, Haiti and Iran.

If you’re taking out this type of insurance, make sure the countries where staff are located or travelling are covered by the policy.

The Australian federal government’s Smart Traveller website has lots of information about how to keep staff safe while they are working abroad. It recommends taking steps such as researching the destination, having a detailed emergency response plan and putting in place personal security to ensure staff are protected no matter where they are working.

Businesses have a duty of care to ensure their staff are safe at all times. If you have staff located overseas, ensure you have put in place steps to reduce the risks they face and support them to come home safe every day.

Policy coverage available

Kidnap and Ransom Cover

You’re covered whether a person is actually abducted or a ransom was paid in the belief that a person had been taken. In addition to covering the cost of the ransom payment, some insurers also cover the interest costs for a loan taken to pay the ransom or extortion payment.

Extortion Cover

This covers threats to:

  • Do bodily harm to an employee as well as his/her family which is politically motivated
  • Cause damage to any premises or tangible property located on the company’s premises
  • Contaminate the products manufactured or distributed by the company
  • Disseminate, divulge or utilise the company’s proprietary information

Lost Ransom Cover

Covers money or other conveyed property used to pay a ransom or extortion demand.


The aim at all times is the safe return of a kidnap victim, coverage extensions should be incorporated for expenses and legal costs incurred to achieve the release of a hostage. These may include independent negotiators’ fees, interest on loans taken out for a ransom payment, salary continuation, consequential personal financial loss and reasonable medical expenses.

Security Consultants

Specialist insurers can provide security consultants from selected security firms, to assist in negotiating an employee’s safe return. While it isn’t mandatory to use a specific firm, early involvement of an experienced security consultant can often mean the quick return of a victim at a reasonable cost.

Legal Liability Cover

This will protect your company in the event it’s deemed to be negligent in hostage retrieval.

How can HDL Help?

With a 100% increase in kidnapping over the last six years, kidnapping has become a fact of life in many parts of the world.

HDL can help protect you with appropriately designed Kidnap, Ransom & Extortion Insurance protection.

If you’d like any more information please contact us.

The information provided in this article is of a general nature only and has been prepared without taking into account your individual objectives, financial situation or needs. If you require advice that is tailored to your specific business or individual circumstances, please contact HDL.

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