‘K & R’ Policy Boom Reflects Rising Risk of Abduction : Security: Stepped-up business travel has meant more opportunities for terrorists and industrial spies. Americans are seen as easy marks.

With even small companies thinking global in today’s competitive business climate, more executives than ever are traveling abroad. Along with this movement has come an increased risk of being kidnaped by foreign terrorists or other criminals.

Most businesses won’t admit it, but more and more of them are purchasing kidnaping insurance for their executives, especially those who frequently travel overseas.

For example, underwriting growth in kidnap and ransom insurance, known as K&R;, has jumped 50% in each of the last five years at Lloyd’s of London, the oldest and largest of the few companies that offer such coverage. (Others include Chubb, Kroll & Associates and American International Group.)

The business is brisk enough that Fireman’s Fund Insurance Co. of Novato, Calif., recently introduced a new kidnaping, ransom and extortion policy featuring immediate intervention by Los Angeles-based Paul Chamberlain International, an investigative and security consulting firm that specializes in recovering kidnaping victims.

The Fireman’s Fund program was started after corporate clients asked for it, company spokesman John Kozero said. In addition to paying ransom, if necessary, Fireman’s Fund sends in a crisis management team to help negotiate a release and keeps the family informed. Fireman’s Fund will also provide counseling for the victim and the family, as well as compensation for injury and loss of earnings. Limits range from $1 million to $30 million; the cost starts at $1,000 a year.

“It’s definitely a growing area,” said Tom Petersen of Petersen International Insurance Brokers in Los Angeles, Lloyd’s West Coast correspondent. “K&R; is the fastest-growing market in the small- and medium-sized business sector.”

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“The barriers are lifted,” Petersen said. “There’s no longer a Cold War, no Berlin Wall. Trade with China is open. Now small and medium-sized businesses have access to places they’ve never been before.”

At the same time, awareness of vulnerability is also going up, he said. “Saddam Hussein did us a great favor in sales. All of a sudden, people realized it happens.”

Indeed it does. Paul Chamberlain International handles about one corporate kidnaping case a month, said John Morrison, director of risk management services and a former FBI agent.

The risk of kidnaping has been rising in recent years, he said, and is particularly high in South and Central America, Mexico, Russia and Eastern Europe.

According to a study by London-based Control Risks Group, the crisis response company retained by Lloyd’s, the number of kidnapings worldwide jumped from 369 in 1984 to 851 in 1990.

Ninety percent of kidnapings are concentrated in 12 countries: Brazil, Colombia, India, Italy, Lebanon, Mexico, Pakistan, Peru, the Philippines, Spain, the United States and Venezuela.

Between 1987 and 1991, 25 U.S. executives were kidnaped, 12 of them U.S. citizens. Nine died.

While increased business travel accounts for some of the elevated kidnaping rate, there is also evidence that abduction is increasingly being used as a means of conducting industrial espionage, Petersen said.

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Espionage has long been accomplished with high-tech equipment, including infrared detectors, hidden cameras and microphones, Petersen said. But counterespionage and security techniques have become equally sophisticated, so some corporate spying is now done by nabbing executives or their relatives and holding them in exchange for industrial secrets, Petersen said.

Regardless of the motivation, business people are at special risk when they travel because they are outside their usual security zones.

“There hasn’t been one kidnaping out of an office,” Petersen said. “People get kidnaped from parking lots, on the way to their child’s school, in the park, in their driveways and outside their hotels.”

Americans are particularly vulnerable overseas, because most were never taught to “harden their target,” which means to make themselves difficult to attack, Morrison said.

“I was in Mexico just recently in a hotel lobby, and you could tell all the Americans. They stuck out,” he said.

Business travelers are also prime targets because, while they may not carry a lot of cash themselves, they are perceived by the kidnapers to be attached to a large organization with deep pockets.

Business travelers are also in more danger overseas because the FBI, which has an excellent record of breaking kidnaping cases in the United States, has no jurisdiction outside the country. The fate of the victim lies in the hands of local police.

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That’s partly why K&R; insurance is gaining favor. “It’s a new phenomenon,” said John Hoos, spokesman for the Los Angeles FBI office. Security firms such as Chamberlain’s complement the FBI and can act overseas in situations where the FBI cannot, he said.

Chamberlain’s company, for example, retains a network of about 80 former FBI and law enforcement officials who can respond to kidnaping crises anywhere in the world. Most are trained hostage negotiators.

A recent case involved the kidnaping of the local manager of a multinational company in a South American country.

“The snatch occurred in broad daylight, downtown,” Chamberlain said. “He was held for eight days for an eight-figure ransom.”

Chamberlain’s company rescued the victim, there was no payoff and one suspect was apprehended. The team was also able to negotiate with the kidnapers to get medication to the victim, Morrison said.

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Although more companies are buying protection, none wants to talk about it, for fear of being seen as a possible target.

“All insurance policies are kept confidential, but these things are really, really confidential,” Petersen said. The company doesn’t even list clients by name, but rather by code number so that no one could find potential victims by breaking into the insurance company’s files.

It’s not paranoia, Morrison said, it’s reality.

“Your chances of becoming a victim are slim, but if you are a victim, it hits you with a resounding thud. Your normal life is completely disrupted,” he said, adding, “This is something a lot of companies don’t like to think about it.”

Assessing Danger Abroad

The protection program at Paul Chamberlain International suggests that answering “yes” to more than three of the following questions would warrant special attention to security.

1. Is the executive’s nationality, race, sex or religion inconsistent with the political, social, religious or ethnic norms of the country he or she will visit?

2. Has your company ever received threats from nationals or groups in any country on the itinerary?

3. Has your firm ever been a target of terrorism in the regions to be visited?

4. Have companies similar to yours been victimized or targets of foreign groups?

5. Does any government, group or people in the countries on the executive’s itinerary object to your company’s business or policies?

6. Has the proposed trip generated less-than-positive reaction from any of the countries to be visited?

7. Is the executive’s visit important enough to be mentioned in the foreign media?

8. Has the U.S. Embassy or Consulate ever received or been aware of any threat against your company or the proposed visitor?

9. Will the executive easily be recognized as such in any country on the itinerary?

Source: Paul Chamberlain International Executive Protection Program