Mid-market companies should monitor the dangers of traveling abroadReprints
Anti-U.S. sentiment throughout the world poses considerable risks for employees of middle-market companies traveling outside of the United States on business.
Take the 2011 kidnapping of Warren Weinstein, a 71-year-old American aid worker from Rockville, Md., by a group claiming ties to al-Qaida. Mr. Weinstein, the Pakistan country director of J.E. Austin Associates Inc., a midsize development contractor based in Arlington, Va., reportedly was taken hostage by gunmen who broke into his home.
A spokesman for the company declined to comment on the situation, or on whether Mr. Weinstein eventually was released, which is not unusual. Most kidnappings go unreported.
In fact, companies that purchase kidnap and ransom insurance coverage cannot divulge the existence of such policies, even to their own employees, as a condition of coverage. Moreover, if word gets out to potential perpetrators that a company has K&R coverage, it could invite such nefarious activities, experts say.
“Very few people in a company should know about the existence of coverage, because it starts to get people to act in ways that they wouldn't normally act if they didn't have the coverage,” said Jeremy Lang, New York-based senior vice president and manager of U.S. kidnap and ransom at Hiscox USA.
But corporate purchases of K&R insurance have been growing in recent years in response to the fact that kidnap for ransom and extortion have become global phenomena, affecting companies of all sizes operating in nearly all countries, experts say. While sometimes kidnappers have political motives — as in the Warren Weinstein case, where the group holding him demanded that convicted terrorists held in the United States be freed in exchange for his release — most abductions are financially motivated, K&R experts say.
“A lot of the time, the groups who grab people will say they're doing it for political purposes. But really, they're looking for money,” said Sarah Katz, assistant vice president of the kidnap, ransom and extortion department at Victor O. Schinnerer & Co. Inc. in Chevy Chase, Md. In some cases, “one group might kidnap someone and then turn around and sell them to another group,” she said.
“The vast majority of kidnaps have a financial objective,” said Jeroen Meijer, Washington-based vice president and director of crisis and security for the Americas at Control Risks Group Holdings Ltd., a global security firm that is hired by insurers to help companies negotiate the release of kidnapped employees.
“The key reason kidnap becomes a popular crime is the risk-reward balance,” he said. “The reason such incidents are less frequent in the United States and Western Europe is because law enforcement agencies there are stronger. However, kidnappers have more impunity to act if there is limited chance of being caught, prosecuted and imprisoned.”
Control Risks also works with companies that are threatened with extortion, another crime that has been increasing in frequency as more U.S. companies expand internationally, according to Mr. Meijer.
“It's a growing problem in Latin America and Mexico, where companies get shakedowns from local criminal gangs,” said Ms. Katz, adding that “more than 40% of the incidents responded to under our policies are actually extortions.”
Another type of criminal activity that has become common in parts of Latin America is “express kidnaps,” a form of extended carjacking that usually lasts less than 24 hours, according to Mr. Lang. In most cases, a victim is taken at gunpoint and driven “around to a whole bunch of ATMs and forced to withdraw as much money as they can, but the kidnapper never makes a call or a demand for money for the employee,” he said.
While traditional kidnaps for ransom are believed to occur about once a week worldwide, “these express kidnaps happen daily, but a lot go unreported,” Mr. Lang said. “It's a black statistic. The victims could be anybody. It's a crime of opportunity.”
Wrongful detention situations, where employees are arrested and imprisoned by local authorities, is another risk that companies may face, particularly in regions antagonistic to the United States, according to Thomas Dunlap, Dallas-based assistant vice president and regional manager for global crisis management in Liberty International Underwriters' Southeast and Southwest regions.
“Say someone travels to a country where there are political disagreements, like Syria or Libya, and it is perceived that they are an unwelcome influence on the population. So the government trumps up some criminal charges and puts them in jail,” he said.
Many companies operating for many years in the Middle East were caught off guard by the political upheaval there starting in December 2010, forcing many of them to evacuate employees traveling or living in Tunisia, Egypt, Libya and Yemen, according to Andres Franzetti, engagement manager for partner solutions at Clements Worldwide, a Washington-based managing general agency that provides insurance solutions to expatriates and international organizations.
“We insure the vast majority of international schools operating overseas. Some of those based in Tripoli had this feeling (that) with the regime in place they would be safe,” Mr. Franzetti said of the schools' sentiments before rebels seized Tripoli in August 2011 and Muammar Gaddafi's regime fell. “We had conversations with them, and they discounted them. Now people have learned a lesson.”
“People have become complacent and believe certain things are not going to happen to them. Companies should evaluate all the potential threats at the risk management and C-suite level,” he said.