Execution of James Foley Underscores the Ransom Risks High Net Worth Families Face

Execution of James Foley Underscores the Ransom Risks High Net Worth Families Face

NEW YORK (MainStreet) — Prior to his execution, American journalist James Foley was held for a $123 million ransom by militants of the Islamic State. While the U.S. government refuses to negotiate with terrorists, behind the scenes, Foley's employer and family desperately tried to raise at least a portion of the demand in an attempt to save his life.

What if the same thing happened to a member of your family? The Chubb insurance group offers this example of a real-life claim: a company's branch manager was abducted while driving back from a business meeting. The kidnappers contacted his family and demanded a ransom of $5 million. The family immediately contacted the police who, unbeknownst to them, were working with the abductors.

A security investigator, realizing the scheme, contacted the officers' superiors and negotiated a $500,000 ransom and quick release of the victim.

It's not an isolated case. Each year there are an estimated 8,000 kidnappings worldwide involving $500,000 million in ransom demands – a 100% increase over the past six years, according to Chubb. Kidnap, ransom and extortion (K&R) insurance is big business, especially for high-priced executives and high net worth individuals. Policies can cover abductions, threats of bodily harm, property damage, computer viruses, the distribution of proprietary information – any action undertaken to extort an individual, family or company.

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For obvious reasons, K&R coverage is protection held close to the vest. Many policies require protected individuals to be unaware that the coverage is in force -- or at the very least, are forbidden to reveal such knowledge.

Mexico – especially resorts like Acapulco – are particularly hazardous. Indonesia, Venezuela, Africa and the Philippines are also on the shortlist of dangerous destinations.

An AIG personal security advisory urges American travelers overseas to keep a low profile.