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

Rate predictions

Rate predictions: Special Contingency Risks - Kidnap and Ransom

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

Key takeaway

The special risks insurance markets have almost uniformly removed all cyber extortion coverage from their policy forms.

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

• Insurers have now 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 they will carry high self-insured retentions coupled with small aggregate limits.

Interest in active assailant coverage continues to grow.

• 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 (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.

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 (victims are tricked into believing a kidnap has occurred and pay 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 the number of 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.