Insurance Marketplace Realities 2023 - Special contingency risks: kidnap and ransom

The pandemic has so far not had a direct impact on this insurance sector, but it is changing 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 (an alleged kidnap has occurred with a quick ransom), 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 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 now uniformly introduced blanket exclusions for cyber extortion, applying the exclusion on all new and renewal business.
• For those few programs that do not have a cyber extortion exclusion, very small limits will apply to crisis response fees and expenses or carry high self-insured retentions coupled with small aggregate limits.

Insurers are introducing coverage exclusions for Russia, Ukraine and Belarus.

• As a result of the crisis in Ukraine and the imposition of sanctions against Russia and against certain elements in Belarus and parts of Ukraine, insurers have introduced coverage exclusions.
• The exclusions have so far been introduced on programs with historic, actual or anticipated employee headcount or travel exposure in/to those countries.
• The scope of coverage exclusions has varied by insurers, ranging from blanket exclusions across the entire program to exclusions under selected endorsements only.

Interest in active assailant coverage is growing.

• In addition to the traditional K&R policies, the special risks market continues to develop and promote policies that respond to a broader 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 (because 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.