The rapid pace of change in the risks around kidnap & ransom (K&R) is creating pressure for fresh insurance solutions to be created, highlighting the gaps in the products the market is currently providing according to one leading underwriter.

Charlie Hanbury CEO of specialty MGA Samphire Risk said the cover provided by insurers needs to change to reflect the new threats that policyholders face.

The rising use of cyber in efforts to maliciously target corporates and high net worth individuals is increasingly not being reflected in the kidnap and ransom policies. The market has retrenched to the point that at present there is little difference in the cover than that offered 30 years ago, despite the change in the way the criminal gangs now operate.

“Criminals are increasingly turning to ransomware attacks to target high net individuals and they are also using cyber technology as part and parcel of any malicious extortive or kidnap plan,” Hanbury explained. “Gone are the days when actual physical surveillance helped them identify their targets; they can of course access so much information online.

“Nowadays people are extremely vulnerable to online risks. For example, social media can provide a rich hunting ground of intelligence into the profile and vulnerabilities of high net worth families, providing the criminals with significant amounts of information.”

While the threat is clear the market has a real challenge on its hands to create solutions that mitigate the threat but are structured in a way in which exposures and aggregations can be effectively managed.

“For good reasons the K&R market has retreated from providing cover cyber extortion and ransomware cover in this space,” Hanbury explained. “Until recently, the cover has in effect been sitting more or less dormant in the policy for 30 years.

“K&R insurers have subsequently suffered a significant level of claims in the last five years by these cases, hitting policies that had never been priced for the risk.  So, the retreat is understandable.”

However, the concern from many is that this doesn’t reflect client needs.

“While there is capacity in the standalone cyber market which will address ransomware cover, the rising level of incidents has similarly seen the market look to revise their approaches to cover, limits and of course premiums, generally to the detriment of clients” he added.

Looking to the future Hanbury said the industry will need to look for workable solutions.

“As an insurer we believe that ‘cyber means’ are going to remain an ever growing method to maliciously target people and organisations,” he explained.  “K&R cover plays a really important role in helping clients address malicious risks, from extortive threats to hostage taking, kidnap and other hostile threats – so we believe that this market needs to find a way to weave back into cover sensible protection from cyber threats.

“However, the issue is hugely complex and the answer is not a simple one. It will require a degree of innovation to meet a need which is not only current but is likely to grow in the future.”

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