Aquifers Approaching Point of No Return
A new pair of studies show many of the largest aquifers are being depleted at alarming rates. Out of 37 of the world’s largest aquifers, more than 21 are past sustainability tipping points, which means that the rate of withdrawal exceeds the rate of replenishment.
Of those at highest risk, 13 are on the verge of exceeding the point at which they may not come back.
In a June 17 PBS NewsHour broadcast, Professor James S. Famiglietti of the University of California, Irvine, the lead author of one of those reports, discusses the potential impact of the dwindling supply of freshwater resources.
Famiglietti’s comments support those of experts interviewed for Aquifer: Nothing in the Bank, part of R&I’s April 2015 Emerging Risks special coverage. In the April article, experts discussed the deep impact of the depletion of California’s Central Valley aquifer on agriculture, as well as the ripple effects for real estate, construction, energy production and more.
VIDEO: Reports confirm that California’s Central Valley has been losing about 5.5. trillion gallons of groundwater per year for the last four years.
Kidnap and ransom has grown into a thriving criminal practice over the past 10 years, with the rise of the Islamic State in the Middle East, not to mention the recent spike in piracy in the Gulf of Guinea off the west coast of Africa.
The scale of the kidnap and ransom (K&R) problem is massive, with combined media reports putting ransom demand figures at more than $1 billion per year globally.
A series of independent studies by the crisis response firm Olive Group estimates that there are about 100,000 kidnappings every year, of which about 40 percent involve a ransom demand.
Among the highest profile cases in recent years was the kidnap and murder of American journalist James Foley by ISIS in northern Syria last year. ISIS demanded $132 million for Foley’s release.
“K&R is a very lucrative criminal endeavor with a high return on investment,” said Michael Sharp, lead underwriter for kidnap and ransom at Ironshore International.
“The rise of Islamic State and their use of kidnapping Westerners as a political tool has increased the number of kidnappings in the Middle East and Africa, in particular.”
Experts say that the bulk of these crimes go unreported because victims and their relatives fear retribution or have been warned not to do so by the authorities or the company that secured their release.
“It’s hard to say the true extent of the problem,” said Bert Van Wagenen, senior vice president of specialty underwriting at HCC Specialty.
“There’s a tremendous amount of publicity about kidnappings in the news right now, but there have been similar incidents in the past that didn’t receive the same attention, so it’s difficult to gauge if it’s getting any worse.”
Chuck Regini, director of global response at crisis response company Unity Resources Group, said that only an estimated one in 10 kidnappings actually gets reported.
However, despite this, he warned that there has been a clear rise in the number of incidents over the last 10 years. In particular, he has seen a spike in kidnappings of foreigners working overseas this year. The spike has occurred across all business sectors and socioeconomic groups, he said.
“As long as international commerce continues to grow in the developing world, and as long as security conditions remain the same and crime goes unchecked, kidnapping numbers will likely grow,” he said.
Insurers have responded to the upsurge in kidnaps and ransoms by increasing their capacity. Most recently, Ironshore’s professional and management liability subsidiary, IronPro, announced that it had extended its coverage capacity for U.S.-based businesses by $5 million, to $25 million, and HCC now offers a limit of $50 million.
Premiums written in this area have also risen as a result of the heightened threat of kidnappings. At least 75 percent of Fortune 500 companies now hold K&R policies, according to industry estimates.
Christopher Arehart, global product manager for crime insurance at Chubb, said that at a rough estimate, global kidnap and ransom operations by terrorists and other criminals brings in hundreds of millions of dollars every year.
Among those most at risk, he said, are exploration firms, non-governmental medical and humanitarian aid organizations, and journalists operating in the world’s harshest and most dangerous environments. Colleges and universities with faculty and students overseas are also at high risk.
“The biggest areas of risk are in countries where there is political instability and poverty,” he said.
Kidnap and ransom was traditionally more widely known in Latin America, in Mexico, for example, but has now spread to Africa, the Middle East and parts of Asia-Pacific.
In terms of underwriting, HCC’s Van Wagenen said that Mexico remained the No. 1 hotspot for kidnap and ransom, followed by Nigeria, Libya, Syria and Pakistan.
Arehart said that while recent media coverage highlights the increase in the use of K&R as a business by terrorists, kidnap and ransom has been used by criminals and thugs throughout history.
“The business aspect of kidnap and ransom remains tried and true,” he said. “At the end of the day it’s about one thing — money.”
He said that kidnappers will always target low-risk, high-reward situations — the risks are that they get caught, prosecuted, jailed or even killed; the rewards, however, are much greater, with the chance to extort millions of dollars out of victims’ families, and their companies, he said.
“When a plant has been infiltrated by a gang or terrorist cell, often the only option is for the company to shut down its operation completely, resulting in a significant loss of business income.” — Christopher Arehart, global product manager for crime insurance, Chubb
“In the Western Hemisphere, the risk is greatest to the local manager,” he said.
“The reverse is true of the Eastern Hemisphere, where the locals have less exposure and the expatriate is the one most at threat.
“The perception among kidnappers in this region of the world is that Westerners are wealthy beyond their dreams, and that they will be able to extort large sums of money out of them.”
Jim Kardaras, senior vice president at Marsh’s FINPRO practice, said that the biggest motivating factors behind kidnap and ransom after political instability and poverty are corruption and the presence of organized criminal gangs.
“The key driver for kidnap and ransom is mass civil uprising or civil war, producing a favorable environment for armed gangs and criminal groups to operate in,” he said.
“Organized criminal activity is predominantly financially motivated and where that is the case, hostages are treated as a commodity for financial gain.”
Another key driver has been the global credit crunch, said Tom Dunlap, kidnap, ransom and extortion underwriter at Liberty Mutual.
“This has led to an increase in criminal activity in many parts of the world,” he said.
“It has been exacerbated by the fact you can get all kinds of information online about who’s being targeted and the ransom sums being demanded, and this in turn has resulted in many copycat type crimes.”
Van Wagenen said that a typical K&R policy would cover kidnap and ransom, extortion and detention. That includes the value of any ransom to be paid as well as any expenses incurred along the way, he said.
The policy also covers the fee for using a qualified crisis response firm retained by the insurer that is on call 24/7 to help find an individual and secure his or her safe release, he said.
“Being able to respond immediately in a kidnap and ransom situation is the most important part of any policy,” he said.
Arehart added that a standard policy will cover companies for any litigation costs that don’t come under the sphere of general liability or workers’ compensation.
“They are designed to protect you against any lawsuits brought by an employee and any indemnity that you may need to pay as part of a settlement with the individual,” he said.
One of the biggest factors that is overlooked, he said, however, is business interruption — which is often not included in a standard policy.
“When a plant has been infiltrated by a gang or terrorist cell, often the only option is for the company to shut down its operation completely, resulting in a significant loss of business income,” Arehart said.
“Being able to respond immediately in a kidnap and ransom situation is the most important part of any policy.” — Bert Van Wagenen, senior vice president of specialty underwriting, HCC Specialty
In terms of the market, capacity is plentiful, he said, although it’s limited to around five or six key players.
Kardaras said that despite the surge in interest and new entrants to the market, brokers have long resisted the insurers’ urge to increase the price of their premiums and that rates still remain low, compared to many other lines.
“On the occasions where premiums have gone up, we have still managed to get enhanced coverage for our clients,” he said.
There are, of course, a number of preventative steps that companies can take to protect themselves and their employees against kidnap and ransom, said Arehart.
Among the most important is to evaluate and understand the environment in which employees are working and to come up with an appropriate contingency plan, he said.
“Essentially you need to know the risks associated with the country you operate in and who is going to be most at risk,” he said.
He recommended that company employees keep a low profile, dressing down and removing any expensive jewelry they may have, and to make any travel arrangements well in advance using their own private transport.
Steve Balmer, kidnap and ransom product manager at Travelers, said: “It should be noted that while kidnapping is a low frequency crime, its impact is substantial.
“The effects are not just felt by the hostages, who are usually left psychologically, if not physically, scarred,” he said.
“It also affects the hostage’s family and friends, who often have to make difficult decisions that could impact the outcome of a case, and their employers, whose reputation and profile could be affected as a result of the event.”
Detention Risks Grow for Traveling Employees
It used to be that most kidnapping events were driven by economic motives. The bad guys kidnapped corporate employees and then demanded a ransom.
These situations are always very dangerous and serious. But the bad guys’ profit motive helps ensure the safety of their hostages in order to collect a ransom.
Recently, an even more dangerous trend has emerged. Governments, insurgents and terrorist organizations are abducting employees not to make money, but to gain notoriety or for political reasons.
Without a ransom demand, an involuntarily confined person is referred to as ‘detained.’ Each detention event requires a specialized approach to try and negotiate the safe return of the hostage, depending on the ideology or motivation of the abductors.
And the risk is not just faced by global corporations but by companies of all sizes.
“The world is changing. We see many more occasions where governments are getting involved in detentions and insurgent/terrorist groups are growing in size and scope. It’s the right time for a discussion about detention risks.”
— Tom Dunlap, Assistant Vice President, Liberty International Underwriters (LIU)
“Practically any company with employees traveling abroad or operations overseas can be a target for a detention risk,” said Tom Dunlap, assistant vice president at Liberty International Underwriters (LIU). “Whether you are setting up a foreign operation, sourcing raw materials or equipment overseas, or trying to establish an overseas sales contract, people are traveling everywhere today for so many reasons.”
Emerging Threats Driven By New Groups Using New Tools
Many of the groups who pose the most dangerous detention threats are well versed in how to use the Internet and social media for PR, recruiting and communication. ISIS, for example, generates worldwide publicity with their gruesome videos that are distributed through multiple electronic channels.
Bad guys leverage their digital skills to identify companies and their employees who conduct business overseas. Corporate websites and personal social media often provide enough information to target employees who are working abroad.
And if executives are too well protected to abduct, these tools can also be used to identify and target family members who may be less well protected.
The explosion of new groups who pose the most dangerous risks are generally classified into three categories:
Insurgents – Detentions by these groups are most often intended to keep a government or humanitarian group from delivering services or aid to certain populations, usually in a specific territory, for political reasons. They also take hostages to make a political statement and, on occasion, will ask for a ransom.
In other cases, insurgent groups detain aid workers in order to provide the aid themselves (to win over locals to their cause). They also attempt prisoner swaps by offering to trade their hostages for prisoners held by the government.
The most dangerous groups include FARC (Colombia), ISIS (Syria and Iraq), Boko Haram (Nigeria), Taliban (Pakistan and Afghanistan) and Al Shabab (Somalia).
Governments – Often use detention as a way to hide illegal or suspect activities. In Iran, an American woman was working with Iranian professors to organize a cultural exchange program for Iranian students. Without notice, she was arrested and accused of subversion to overthrow the government. In a separate incident, a journalist was thrown in jail for not presenting proper credentials when he entered the country.
“Government allegations against detainees vary but in most cases are unfounded or untrue,” said Dunlap. “Often these detentions are attempts to prevent the monitoring of elections or conducting inspections.”
Even local city and town governments present an increased detention risk. In one recent case, a local manager of a foreign company was arrested in order to try and force a favorable settlement in a commercial dispute.
Ideology-driven terrorists – Extremist groups such as Boko Haram and ISIS are grabbing most of today’s headlines with their public displays of ultra-violence and unwillingness to compromise. The threat from these groups is particularly dangerous because their motives are based on pure ideology and, at the same time, they seek media exposure as a recruiting tool.
These groups don’t care who they abduct — journalist, aid worker, student or private employee – they just need hostages.
“The main idea here is to shock people and show how governments and businesses are powerless to protect their citizens and employees,” observed Dunlap.
Mitigating the Risks
Even if no ransom demands are made, an LIU kidnap and ransom policy will deliver benefits to employers and their employees encountering a detention scenario.
For instance, the policy provides a hostage’s family with salary continuation for the duration of their captivity. For a family who’s already dealing with the terror of abduction, ensuring financial stability is an important benefit.
In addition, coverage provides for security for the family if they, too, may be at risk. It also pays for travel and accommodations if the family, employees or consultants need to travel to the detention location. Then there are potential medical and psychological care costs for the employee when they are released as well as litigation defense costs for the company.
LIU coverage also includes expert consultant and response services from red24, a leading global crisis management assistance firm. Even without a ransom negotiation to manage, the services of expert consultants are vital.
“We have witnessed a marked increase in wrongful detentions involving the business traveler. In some regions of the world wrongful detentions are referred to as “business kidnappings.” The victim is often held against their will because of a business dispute. Assisting a client who falls victim to such a scheme requires an experienced crisis management consultant,” said Jack Cloonan, head of special risks for red24.
Without coverage, the fees for experienced consultants can run as high as $3,000 per day.
Given the growing threat, it is more important than ever to be well versed about the country your company is working in. Threats vary by region and country. For example, in some locales safety dictates to always call for a cab instead of hailing one off the street. And in other countries it is never safe to use public transportation.
LIU’s coverage includes thorough pre-travel services, which are free of charge. As part of that effort, LIU makes its crisis consultants available to collaborate with insureds on potential exposures ahead of time.
Every insured employee traveling or working overseas can access vital information from the red24 website. The site contains information on individual countries or regions and what a traveler needs to know in terms of security/safety threats, documents to help avoid detention, and even medical information about risks such as pandemics, etc.
“Anyone who is a risk manager, security director, CFO or an HR leader has to think about the detention issue when they are about to send people abroad or establish operations overseas,” Dunlap said. “The world is changing. We see many more occasions where governments are getting involved in detentions and insurgent/terrorist groups are growing in size and scope. It’s the right time for a discussion about detention risks.”
For more information about the benefits LIU kidnap and ransom policies offer, please visit the website or contact your broker.
Liberty International Underwriters is the marketing name for the broker-distributed specialty lines business operations of Liberty Mutual Insurance. Certain coverage may be provided by a surplus lines insurer. Surplus lines insurers do not generally participate in state guaranty funds and insureds are therefore not protected by such funds. This literature is a summary only and does not include all terms, conditions, or exclusions of the coverage described. Please refer to the actual policy issued for complete details of coverage and exclusions.
This article was produced by the R&I Brand Studio, a unit of the advertising department of Risk & Insurance, in collaboration with Liberty International Underwriters. The editorial staff of Risk & Insurance had no role in its preparation.