>>>>
<excerpt>One condition of kidnap policies is that people who are insured
must promise not to tell anyone they have the coverage. That's because,
the insurance companies say, simply having a policy makes clients look
like gold-plated targets. Hargrove would not discuss whether he had
kidnap insurance, and insurance companies refused to give even routine
data on the extent of the market.
To guard against accidental disclosures, Rice of Marsh & McLennan said,
companies often do not even tell employees that they are covered against
kidnapping. The policies themselves are handled like top-secret
documents.
"When we issue a policy, you are given a number," Rice said. "We don't
even put the company name on the file. The policies are locked in a
drawer and only one person has the key."
</excerpt><<<<<<<<
=======================================
August 21, 1997
Kidnap Insurance: Peace of Mind for Global Executives
By JOSEPH B. TREASTER
he worst day for Thomas Hargrove was the day the guerrillas mistakenly
killed the cow.
That blunder sent the leader of the tiny band that had kidnapped Hargrove
into a rage. He stomped around the encampment in the cold, wet mountains
of Colombia, shooting at rocks and trees, his mind fuzzy with whisky and
cocaine. Still furious, the guerrilla leader came up behind Hargrove,
then in his early 50's and the head of communications at an international
research center near Cali and pressed the steel barrel of his rifle
against the American's skull. He pulled back a couple of inches and fired
-- into the sky.
"I was very close to dying," Hargrove said the other day.
It would be months before Hargrove's wife, Susan, and his two college-age
sons could negotiate his freedom with a ransom of several hundred
thousand dollars. Tethered on a short chain and kept alive with cold rice
and sometimes a few beans, he came out of captivity in August 1995 a
walking skeleton of 125 pounds.
Nightmarish experiences like these, while rare, are driving flourishing
sales in a special kind of insurance policy: coverage against kidnapping.
The insurance is designed for expatriate executives, corporate road
warriors and even those at the home office. Wealthy foreigners, who are
even more attractive targets than American executives, are also signing
up.
The policies not only provide money for ransom, but also pay for such
things as the costly fees of kidnap negotiators -- which can run to
$15,000 a week -- and follow-up psychiatric treatment for victims and
their families.
America's biggest multinational corporations have quietly carried
coverage against kidnapping for years. But as United States business
spreads its wings ever wider around the globe, much smaller companies are
now signing up for the protection in rapidly growing numbers. And
throughout the world these days, insurance companies and their security
experts are becoming a crucial lifeline for American executives.
"When something happens, your first call is to the insurance company, not
the embassy or the Marines," said Hugh Rosenbaum, an executive in London
for Tillinghast-Towers Perrin, an American insurance consulting firm.
While globe-trotting executives are the archetypal customers for kidnap
insurance, security experts say that domestic banks often buy the
coverage, too, because the money in their vaults makes them tempting prey
for kidnapping and extortion, which is also covered by these policies.
The nation's football, baseball and other professional sports teams buy
kidnap insurance -- as do many of the best known names in Hollywood.
The increased business is attracting new entrants. With tens of thousands
of companies already enrolled and sales rising at 15 percent to 20
percent a year, more insurers are beginning to offer kidnap coverage.
Cigna Corp., a large property casualty and health care company, has just
entered the field. And J&H Marsh & McLennan, a big insurance brokerage,
is expected to come out with a policy soon that, among other things, has
a maximum ransom payment to $60 million, $10 million more than most
competing policies.
With competition heating up, old-timers in the field, like the American
International Group, have begun adding to the services that come with
their policies.
"Companies used to buy this coverage only for their most senior people,"
said Mack F. Rice Jr., a senior vice president at Marsh & McLennan. "But
as companies are working much more in the third world, in places like
Russia and Latin America, virtually all their employees, anywhere in the
world are being covered. Family members and even guests of employees are
covered."
Kidnapping is a money maker for insurance companies because there is a
lot more fear of kidnapping among the prime customers -- international
business people -- than there is kidnapping itself. While kidnapping is
on the rise -- security experts estimate there were more than 10,000
around the world last year -- most victims are wealthy residents of such
countries as Colombia, India, Mexico, Pakistan and the Philippines. They
estimate that last year no more than 200 victims were captured on foreign
soil and only a few dozen of those were Americans.
"In Mexico, Colombia and Brazil, they clearly prefer locals," said E.C.
(Mike) Ackerman, a former CIA operative who runs Ackerman Group Inc., an
international security firm in Miami on contract to Chubb Corp., one of
the first providers of kidnap insurance. "In Europe," he added, "the
kidnappings almost always involve wealthy Europeans. They don't think
we're big enough fish."
In the United States, kidnapping of executives and other prominent people
is one of the least common crimes, security experts say. That's because
kidnappers here are almost always caught and long prison sentences are
the rule.
Nevertheless, American corporations buy kidnap insurance -- like most
other insurance -- for peace of mind. After all, it is relatively cheap.
For example, $1 million worth of coverage for three years, the customary
period for these contracts, can cost as little as $1,000, said Rice of
Marsh & McLennan, depending on where clients travel and how often. For
many large multinational corporations the premium is often in the range
of $25,000 to $50,000.
For the same amount of coverage against fire, wind and other hazards on a
business, the cost is considerably higher. And protection of directors
and officers against civil litigation of all kinds is even more costly.
That's because the likelihood that a building will be damaged or that
management will be sued is much higher than the chances that an executive
will be kidnapped.
As kidnappers demand bigger ransoms -- one of the largest was more than
$30 million for a Mexican business executive a few years ago -- the
insurance becomes an important bulwark of a company's financial
stability, particularly for smaller companies. "If you're a Fortune 100
company you can afford to pay a ransom yourself," said Ackerman. "And you
can afford to hire security consultants to help get your employee back.
But I've worked some cases where small companies really had to strain to
come up the ransom money."
Actually, the ransom is just the most obvious expense of a kidnapping.
Policies also pay for interpreters, travel expenses, lost salary and the
cost of hiring a replacement. They even cover the victim's financial
losses, such as the failure to exercise stock options and renew insurance
policies. They pay for a vacation after the victim is reunited with his
family and, if needed, cosmetic surgery. The policies also cover the
costs of defending legal suits that might arise from a kidnapping --
including cases where the wife of a victim sues the company because she
thinks that it did not do enough for her husband.
Should the ransom money somehow get hijacked on the way to the
kidnappers, the insurance company takes care of that, too, with a new
bundle of money.
Often the insurance company and its security experts are the only place
the family can turn for help. "In many countries, the police are
incompetent or corrupt," said Brian Jenkins, the deputy chairman of Kroll
Associates, an international security firm in New York. Sometimes, he
said, the police turn out "to be part of the kidnap gang, or they shake
down the kidnappers for a share of the ransom."
In some countries, the authorities try to prevent payment of ransoms,
saying that the money strengthens and encourages criminal or political
groups. Sometimes, police or military units try to solve kidnappings by
assaulting hideouts with their guns blazing. In these cases, the
authorities often get their men -- both the kidnappers and their victims
are almost always men -- though seldom alive.
But for or the families of kidnap victims, the issue is not whether to
pay a ransom, but how. "You pay the ransom or you die," said Susan
Hargrove.
So the battle plan of the security consultants is straightforward:
Establish communications with the kidnappers and keep them talking.
Negotiate the size of the ransom and work out the mechanics of delivering
the money and recovering the victim.
When an executive who does not have insurance is kidnapped, companies and
families turn to the same security experts. But there is inevitably some
delay in getting the recovery operation rolling and there is no one else
to pick up the enormous expenses.
One condition of kidnap policies is that people who are insured must
promise not to tell anyone they have the coverage. That's because, the
insurance companies say, simply having a policy makes clients look like
gold-plated targets. Hargrove would not discuss whether he had kidnap
insurance, and insurance companies refused to give even routine data on
the extent of the market.
To guard against accidental disclosures, Rice of Marsh & McLennan said,
companies often do not even tell employees that they are covered against
kidnapping. The policies themselves are handled like top-secret
documents.
"When we issue a policy, you are given a number," Rice said. "We don't
even put the company name on the file. The policies are locked in a
drawer and only one person has the key."
Richard R. Johnson, an owner of the Seitlin & Co. Insurance Agency in
Miami, which sells a lot of kidnap insurance, estimates that executives
with a kidnap policy are four times more likely to survive a kidnapping
than those without coverage.
Nearly every company that buys the insurance heeds the advice of the
security consultants to set up a simple plan of action in advance. More
than one regional manager made recovery more difficult, Jenkins said, by
trying to resolve a kidnapping on his own without calling headquarters.
To qualify for discounts on their premiums, many companies agree to train
their employees in the best ways to avoid kidnapping and other threats --
without necessarily explaining to them that the company carries kidnap
insurance. And the companies usually go along with the consultants'
suggestions on how to to improve security at their offices and factories.
When Hargrove was kidnapped, he was driving to work at his research
center on the outskirts of Cali. He had decided to take the scenic route
that morning and was gazing at the emerald hillsides when he spotted what
he thought was an army road block. He realized he was in trouble when he
saw the men were wearing ski masks.
With rifles drawn, the abductors forced him into the back of a pickup
truck and sped off. It was nearly a year before he saw his family again.
Home in Texas now, Hargrove has built a new life as a consultant on
agricultural communications and education. But his memories of captivity
are seared forever.
"You never knew if it would ever end," he said. "The people who took me
were not ideologues. They were semiliterate teenagers, not smart enough
to understand the implications of their actions. You never knew what they
might do."
---Rohit Khare /// MCI Internet Architecture (BOS) /// khare@mci.net
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