Market conditions for kidnap, ransom and extortion coverage have remained stable despite increased geopolitical friction, and existing buyers are seeing flat or lower renewal rates due to an abundance of capacity, experts say.

Multinational organizations that send employees abroad continue to be buyers of the coverage as they seek protection from the physical and financial consequences of kidnapping and extortion.

Meanwhile, domestic threats have piqued the interest of new buyers in the coverage, experts say.

Smaller organizations with primarily domestic exposures have become more interested in securing KR&E coverage, said Sarah Katz, Bethesda, Maryland-based vice president of kidnap, ransom and extortion at Victor Insurance Managers LLC, a unit of Marsh LLC.

“Coverage has traditionally been driven by the foreign exposure an organization or a high-net-worth family or individual may have. While that still does continue to drive coverage, given growth in domestic threat incidents, we’ve seen increases for organizations that have very limited or even no foreign exposure but highly trafficked premises, such as health care and hospital systems, retail stores and restaurants,” she said.

Small and mid-size companies are also expressing interest in KR&E coverage due to the increasing risk of domestic and virtual kidnapping, which involves threatening and seeking a ransom for a person’s loved one even though that person has not been abducted, and some are asking about assault coverage to protect against workplace violence and active assailants, said New York-based Denise Balan, senior vice president and head of security risks at Axa XL, a unit of Axa S.A.

Although active assailant and workplace violence coverage is usually available on a standalone basis, some insurers include some coverage for those risks in KR&E policies, said Austin, Texas-based Jon Janes, senior vice president and account executive for the management liability practice at Woodruff Sawyer & Co.

“The risk that’s being assumed or underwritten by insurers in this space has certainly evolved to include nontraditional KR&E events,” he said.

Some insurers, however, have excluded workplace violence and active shooter endorsements from KR&E policies due to the increased frequency of the events and the costs of claims, said Kevin Henry, divisional assistant vice president of KR&E coverage in Great American Insurance Group’s fidelity and crime division.

Mr. Henry said the benefit of a standalone active shooter and workplace assailant policy is that it provides broad coverage and is intended to prevent such events by providing training and inspecting facilities during the underwriting process.

Larger, multinational companies are inquiring more about specific country exposures, Ms. Balan said.

“We’ve received a lot of calls from companies that are now making safety and security for executives a top priority,” said Boston-based Daniel Linskey, managing director in enterprise security management at Kroll LLC.

The uptick in interest may result in an increase in placement of KR&E coverage, but, if it does, widespread market movement knowledge will likely be delayed or limited because the policies may prohibit public disclosure of purchase, said Dallas-based Paul King, senior vice president, USI Insurance Services LLC.

Coverage breadth

KR&E policies provide coverage for more than the cornerstone perils of kidnaps and ransoms. Events such as disappearances, security evacuations and wrongful detention also fall under a KR&E policy, said Scott Konrad, New York-based North American nonprofit practice leader at Hub International Inc.

“This is a six-pack of coverages. It’s a bundle of different types of coverage, with the common denominator inevitably being a security-related situation,” he said.

Coverage can even be triggered by a threatening phone call to a company’s switchboard, Mr. Konrad said.

In addition to offering coverage for various events, a KR&E policy can have an extensive list of named insureds, including executives, domestic and international employees, and family members. Mr. Konrad said independent contractors can also be named as insureds.

Capacity for KR&E coverage is abundant, he said.

Competition in the market is fueled by insurers’ crisis response teams, which can drive a company’s decision to obtain a policy from a particular insurer, Mr. Janes said.

Coverage limits are also abundant. For example, Axa XL offers up to $100 million, Ms. Balan said.

“Most submissions that come to us are looking for limits well under $50 million,” she said.

Pricing

Premium costs are typically based on a company’s size, industry, location and risk exposures.

Mr. Konrad said he has not seen the “wild pricing or coverage swings” that he’s seen in other lines.

Most premium fluctuations occur when a company increases or decreases the amount of international travel done by its employees, Mr. Henry said.

Kidnaps and threats are the most common claims submitted under a KR&E policy, he said, but not the most expensive.

“People think most ransoms are for millions of dollars. They’re not. The average ransom is much lower, but it depends on who is behind it,” Mr. Henry said.

For example, he said the ransom for a local national citizen could run in the thousands of dollars, not millions.

Insurers also cover events such as express kidnaps, which Mr. Konrad said most often occur in Latin America when an individual is abducted off the street and driven by assailants to multiple ATMs to withdraw large amounts of cash.

Child abduction coverage is an endorsement in KR&E policies that is becoming appealing for daycare facilities, he said.

While kidnaps and threats are the most common types of claims, they are relatively short in duration and are typically resolved within days or weeks, not years, Mr. Henry said.

Wrongful detentions, on the other hand, are the most expensive and complex claims to handle because the victims can be used as political pawns by adversarial foreign governments for longer periods of time, he said.

Resolving a wrongful detention can take years, and KR&E policies typically cover the costs related to the incident, he said.

“We’re likely to see more wrongful detention claims, and that’s going to be driven by the geopolitical trend worldwide of becoming a bit more aggressive,” Ms. Balan said.

One area where KR&E insurers are excluding coverage is for ransomware events and other cyber incidents.

“We used to provide cyber extortion cover years ago, but there was such adverse loss development that we now leave those exposures to the cyber team, who provide focused expertise on the underwriting of those exposures,” Ms. Balan said.

Some insurers are also excluding coverage for certain countries or charging higher premiums for them, Mr. Henry said.

“We are seeing, selectively, the application of some country exclusions,” Mr. Konrad said.

Legal disputes don’t often arise when a claim triggers a KR&E policy, said Washington-based Lorelie Masters, an insurance recovery partner at Hunton Andrews Kurth LLP.

“I haven’t had one in litigation for some time, but disputes can arise. What we like to try to do is see if we can work with the insurer and try to get to a point that works for everybody,” she said.

Claims under a KR&E policy are a matter of severity, not frequency, Mr. Henry said,

“Most companies buy a policy, and they never need it, thankfully,” he said.

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Pack burner phones, dress down for travel abroad

Reducing the risk of kidnapping or wrongful detention when traveling abroad, especially in high-risk countries, can be as simple as knowing your surroundings and not drawing attention to yourself, experts say.

In some countries, the sight of a U.S. passport can make an individual a target for a politically motivated wrongful detention.

“Some of the most expensive losses are detentions because the duration can extend for a long period of time, and there isn’t the leverage of a ransom in the negotiation process. Those are the type of incidents that can last for years,” said Sarah Katz, Bethesda, Maryland-based vice president of kidnap, ransom and extortion at Victor Insurance Managers LLC.

Advanced training and reading security risk reports before traveling are effective ways to learn about the threat conditions in a country, she said.

Enrolling in the U.S. State Department Smart Traveler Program to let the department know about foreign travel can be helpful for U.S. citizens, she said. This is especially useful if a country’s security situation deteriorates because the embassy can contact the traveler if there’s an emergency, she said.

How you dress is also important.

“You don’t want to have the trappings of wealth if you can prevent it, and you want to stay where you should be staying,” said Boston-based Daniel Linskey, managing director of enterprise security management at Kroll LLC.

He also recommends using reputable transportation companies when traveling in a country.

Employees should also review the technology they are carrying.

“We recommend that people don’t travel with site history and potentially sensitive information on their smartphones into certain countries. Take a burner phone, don’t take a smartphone,” said Denise Balan, senior vice president and head of security risks at Axa XL, a unit of Axa SA.