Insurance Marketplace Realities 2022 Spring Update – Special contingency risks: Kidnap and ransom

Rate predictions: Special contingency risks – Kidnap and ransom

	Trend	Range
Special contingency risks – kidnap and ransom		-5% to +5%

Key takeaway

While the prevalence of cyber exclusions will send insureds looking for other solutions to cyber extortion risk, kidnap and ransom products are being increasingly sought out for active assailant risk cover. Insurers are also beginning to restrict coverage for exposure in Belarus, Russia and Ukraine.

The pandemic has so far not had a direct impact on this insurance sector, but it has changed the nature of the risk.

• As restrictions and lockdowns have eased, the incidence of kidnap activity has returned to pre-COVID-19 levels in several countries. While the decline in international travel has led to a perceived reduction in risk, our data shows an increase in the numbers of local nationals kidnapped.
• Moreover, criminals have continued to invest in schemes, such as virtual kidnaps (efforts to extort quick ransom payments when kidnappings have not actually occurred), to exploit the current environment and maintain a cashflow to fund further illicit operations.
• Cyber extortion has also continued unabated, as many technology-related crimes are not impacted by lockdowns or reductions in social and business interaction. Indeed, the steep rise in people working from home has presented cyber criminals a wider range of softer targets.
• Many believe that the economic downturn and lingering financial impact of COVID-19 could lead to increased security threats and higher rates of criminality globally as groups/individuals become more desperate.

Insurers are tightening policy language pertaining to cyber events that could be considered part of a ransom scenario.

• Insurers have almost entirely introduced blanket exclusions for cyber extortion, applying the exclusion on all new and renewal business.
• For those few programs with cyber extortion coverage, very small limits will apply to crisis response fees and expenses, or the policies will carry high self-insured retentions coupled with small aggregate limits.

Coverage restrictions for Russia, Ukraine and Belarus:

• Insurers are beginning to issue exclusions for these countries on new business and renewal quotations.
• Coverage exclusions range from being specific to expatriate and travel security evacuation endorsements to blanket across the entire policy.
• Insurers’ coverage exclusions will likely be tied to the security developments in these countries for the immediate and mid-term future.

Interest in active assailant coverage is growing.

• In addition to traditional K&R policies, the special risks market continues to develop and promote policies that respond to a broad range of security-related perils.
• We have seen special risks insurers, as well as other specialty insurers, show greater interest in active assailant coverage and offer increasingly customized solutions (either via endorsement or stand-alone policies) with a focus on post-incident crisis management support, legal liability, business interruption (as a result of both physical and non-physical damage) and indemnification of a variety of incident-related expenses.
• These solutions go beyond traditional terrorism and/or political violence coverage and are increasingly being used to complement traditional policies.

Disclaimer

Willis Towers Watson hopes you found the general information provided in this publication informative and helpful. The information contained herein is not intended to constitute legal or other professional advice and should not be relied upon in lieu of consultation with your own legal advisors. In the event you would like more information regarding your insurance coverage, please do not hesitate to reach out to us. In North America, Willis Towers Watson offers insurance products through licensed entities, including Willis Towers Watson Northeast, Inc. (in the United States) and Willis Canada Inc. (in Canada).

Each applicable policy of insurance must be reviewed to determine the extent, if any, of coverage for losses relating to the Ukraine conflict. Coverage may vary depending on the jurisdiction and circumstances. For global client programs it is critical to consider all local operations and how policies may or may not include coverage relating to the Ukraine conflict. The information contained herein is not intended to constitute legal or other professional advice and should not be relied upon in lieu of consultation with your own legal and/or other professional advisors. Some of the information in this publication may be compiled by third-party sources we consider reliable; however, we do not guarantee and are not responsible for the accuracy of such information. We assume no duty in contract, tort or otherwise in connection with this publication and expressly disclaim, to the fullest extent permitted by law, any liability in connection with this publication. Willis Towers Watson offers insurance-related services through its appropriately licensed entities in each jurisdiction in which it operates. -The Ukraine conflict is a rapidly evolving situation and changes are occurring frequently. Willis Towers Watson does not undertake to update the information included herein after the date of publication. Accordingly, readers should be aware that certain content may have changed since the date of this publication. Please reach out to the author or your Willis Towers Watson contact for more information.

Contacts

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Philipp Seel

Director, Head of Special Risks North America
Special Contingency Risks, Inc.

email Email phone +1 212 519 7202

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Concetta Longobardi

Special Contingency Risks, Inc.

email Email phone +1 212 519 7203

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