A policy to pay ransom


Dear world traveler: Should you consider kidnap and ransom insurance?

Such insurance, which does just what it says -- pays your ransom if you’re kidnapped -- is not as crazy as it may sound, at least for some travelers. As the global economy slides, such crimes are multiplying.

“The number of kidnappings is exploding around the world,” said Greg Bangs, vice president of Chubb Group of Insurance Cos. in Warren, N.J., which he said is the world’s third-largest underwriter of so-called K&R insurance. (The largest is London-based Lloyd’s, he said.) Bangs manages Chubb’s K&R division.

Thousands of people worldwide are kidnapped each year, Bangs said, although the total is hard to determine because the crime is underreported. Ordinary tourists generally are not the targets, which may negate the need for such a policy. Most victims seem to be locals or business people and their dependents, experts said.

But certain travelers may have more cause for concern than others, according to underwriters and agents who sell K&R.

Among them are celebrities, the wealthy, aid volunteers, yachtsmen and anyone who ventures into dicier corners of the globe.

“Travelers more and more are exploring areas that they haven’t traditionally explored,” Bangs said. “In many cases, they’re putting themselves in harm’s way.”

In a widely publicized case, Britons Paul and Rachel Chandler, on an around-the-world sailing trip, were captured in October by Somali pirates who boarded their yacht off the Seychelles and initially demanded $7 million in ransom, now dropped to $3 million. At press time, the case was ongoing.

The State Department also says that “in recent years, dozens of U.S. citizens living in Mexico have been kidnapped.” Despite the tragic abduction-murder of El Monte civic leader Bobby Salcedo on a recent trip to Mexico, visitors have not generally been targeted.

K&R insurance remains a niche. Most policies are bought by companies to cover employees overseas and various other situations, such as extortion threats, said Debra Clark, program manager of kidnap and ransom for Victor O. Schinnerer & Co., a major underwriting manager in Chevy Chase, Md.

But “we are seeing an uptick in individuals and families over the last few years,” Clark said.

Bangs said his company writes thousands of K&R policies a year, including “a lot of coverage for high-profile entertainers and sports figures.”

Timothy Gaspar, founder of Timothy Gaspar Insurance Services in Encino, which sells mostly property- and casualty-related policies to its 2,500 clients, said he has sold fewer than 10 K&R policies in two years -- the most recent to a woman flying from Los Angeles to Kenya to do missionary work.

Premiums can run in the thousands. Even a low-end policy, which would pay up to $1 million, can cost around $1,000 per year, Bangs said.

Besides writing the check and assorted other services, he said, you can expect K&R insurers to dispatch security consultants to the scene who will “negotiate with the kidnappers, deliver the ransom, whatever it takes. Every case is different.”

A spokeswoman for London-based Control Risks, a top security company involved in K&R, did share its Top 10 list of countries with the most kidnap-for-ransom cases in 2009, based on incidents in which it has “obtained reasonably reliable information.”

In alphabetical order: Afghanistan, Brazil, Honduras, India, Mexico, Nigeria, Pakistan, Philippines, Somalia and Venezuela.

What makes these places a more likely spot for trouble?

“Any country or region that has political or economic instability, there’s going to be an increased likelihood of criminal activity,” said Clark, the program manager of K&R for Schinnerer & Co. “Latin America has always been an area of concern, certain areas in the Middle East. . . . Really, there are pockets all over the world. With the downturn in the economy, there’s been an uptick in criminal activity, including kidnapping and extortion.”

The odds of a visitor being abducted are slim. The question for travelers, especially those in higher-risk categories, is whether those odds are good enough.