Against the backdrop of a deteriorating security picture in some Latin American countries such as Ecuador, which recorded 8,000 violent deaths in 2023 and a rise in kidnappings, there is growing corporate interest throughout the region for kidnap and ransom (K&R) insurance as companies look to enhance their duty of care towards employees.
“We are starting to see more Latin American corporations buy K&R, in many cases for the first time,” says Elman Myers, a senior consultant within Hiscox’s London Market Crisis Management division. “This trend seems to be linked with the professionalisation of the security function within organisations, demonstrating how some businesses are moving their risk management operations to a more sophisticated level to address increased security risks. Incorporating K&R insurance into the risk management mix is an important step in that process.”
Real and present dangers
Falling victim to criminal events like kidnappings, ransom payments, extortions and threats are incidents that no business expects or wants to experience. However, for those organisations operating in high-risk areas of the world, such as Latin America, these incidents are a realistic threat, particularly as businesses expand and grow. “Many enterprises in Latin America begin as family businesses,” says Myers, “but with growth and success comes more employees, bigger operations and, as a consequence, more security risks.” The brand becomes better known, Myers adds, as do the founders and leaders of the business who may become more prominent. That exposure results in increased personal risk for themselves and their families as well as risks for their employees, and other stakeholders such as investors, partners and customers. “This changing profile means that both risk mitigation and risk transfer (insurance), become increasingly relevant. It’s no longer appropriate to simply assume these security risks as part of the cost of doing business in some regions,” says Myers.
Professionalising risk management
The professionalisation of an organisation’s risk management begins with more security measures for business owners both at work and at home. But security concerns also extend to the safety of their employees. Those considerations should focus on where they travel on business and where the organisation’s offices and factories are located. “Does working for the organisation take employees to high-risk places where their security could be at threat?” says Myers. “If so, those businesses need to provide orientation and security awareness training for all employees travelling and, if something goes wrong, have the necessary resources to safely deal with any incident.”
Developing new risk management strategies
As a company grows in size, scale and sophistication, new risk management strategies are likely to be needed. “At a certain point, security risks like extortion against the company, threats against management, a hostage crisis, an active shooter incident, or the kidnapping of an executive or a family member all need to be considered,” says Myers. “How would an organisation respond to such an incident? Can local resources be relied upon to appropriately investigate and respond to the case? Do they have the experience and training to handle these situations effectively?” Responding to these uncertainties is why K&R insurance is such a valuable risk management tool. “Designed to respond to the risks of threats to life and financial loss, K&R helps businesses work with their employees to prevent an incident through security orientation training. But, if the worst should happen, it provides for the deployment of experienced crisis response consultants to support and advise during a crisis, and for financial losses,” explains Myers.
Ultimately, Myers concludes, it’s the range and depth of support offered in a crisis that is making the increasing focus on K&R a natural development for businesses throughout the Latin America region: "A mature, well-managed company looks at insecurity in all its forms and assesses the risk it poses to its people, its operations and its bottom line. The trend we’re seeing in K&R-related risk management is a reflection of this and is one we are likely to see more of throughout Latin America over time.”
