Focus on malicious threats and extortion at Parima Hong Kong breakfast

This was the key message from the Pan-Asia Risk and Insurance Management Association’s (Parima) recent breakfast seminar on malicious threats and extortion, held in Hong Kong in partnership with broker Jardine Lloyd Thompson (JLT) and insurer XL Catlin. The event was held in recognition of the growing concern among corporates about the safety of their employees, families and staff operating both at home and overseas. Local risk managers were joined by specialists from the insurance world to discuss this growing concern and suggest ways to mitigate the developing risk.hideAshley Coles, assistant director, credit, political and security risks, kidnap and ransom, JLT, told Commercial Risk Asia: “It is a sad fact that incidents of malicious crime, extortion and of course religious fundamentalism are on the increase and one only needs to read the front-page news to understand the changes occurring in the global security dynamic.” Mr Coles continued: “While traditionally these concerns have been associated with conflict zones, we now know that incidents can happen almost anywhere at any time. Whether that is the recent attacks in Jakarta, Paris, Brussels, Tunisia, Cote D’Ivoire, or indeed the targeting of high net worth individuals in cities like Hong Kong, these events are on the radar of risk managers and key stakeholders across Asia.” The main concern comes from a duty of care perspective but reputation and balance sheet protection as well as business continuity are also key issues when talking about these types of events, said Mr Coles. “Increasingly, companies are looking to expand their operations overseas and this can mean exploring unchartered and potentially risky locations. “At the same time, there is concern about business dispute and corruption-driven incidents closer to home – and any company of any size needs to understand its own individual exposures. This naturally includes the ever evolving cyber risk threat, in addition to the traditional threat or extortion demand by telephone, fax or email.” Managing corporates’ exposure to these kind of threats can of course be challenging because the spectrum of risk in 2016 is so wide, said Mr Coles. Consequently, JLT’s special risks insurance division aims to provide protection against anything from malicious crime all the way through to emergency evacuation from a security threat or natural disaster. In addition to having wide coverage, Mr Coles recommends that corporates have a coherent response process, should an event occur. “Naturally for a company with large employee numbers, ensuring one has something in place to respond effectively and immediately is essential,” said Mr Coles. “Private security firms associated with the insurance policy have expert teams monitoring the global security situation, which allows the client to make sensible decisions about where and how they operate at home and overseas.” Perhaps the biggest challenge for insurers and risk managers regarding kidnap and ransom, extortion and malicious threats is their confidential nature. It is the risk that dare not speak its name, making it difficult to amass industry-wide data. But while loss history relating to this insurance is highly confidential, public source information and insurers’ own claims history allow them to rate the risk of a particular client accordingly, said Mr Coles. “This also allows us to provide the client with regular advice, updates and in many cases, crisis management training on how best to manage their specific exposures.” As with most other risks, cyber-based threats are becoming a growing concern and adding a new dimension to the area of extortion. “Cyber threat is certainly a growing risk and one that the insurance industry in Asia is responding to with cutting-edge products to address the evolving challenge,” said Mr Coles. Under the JLT special risks insurance coverage, there is protection against cyber extortion – the making of illegal threats to an insured to introduce, initiate or release a computer virus into their systems and ‘lock systems’ or release confidential information, by people who then demand a ransom as a condition of not carrying out that threat. “Separately, there are standalone cyber insurance products – which we recommend our clients consider – and are designed to tackle a whole range of data risks and system failure. It really depends on what the client’s concern is. If they are concerned primarily about extortive crime with accompanying ransom demands, then the special risks policy is an answer but if a broader approach to data and system risks is required, then a dedicated standalone cyber policy is a more thorough approach.” Alongside Mr Coles, another speaker from the insurance industry was Alex Smith, underwriter for XL Catlin’s crisis management team, who specialises in kidnap, ransom and vessel hijack risks. According to Mr Smith, the awareness of this issue is growing in Asia, in part because more of these incidents are making the mainstream news. Awareness is also rising because of the rise of specialists on the ground in Asia, who are able to better inform clients and risk managers about the availability of insurance cover and crisis management prevention. “While kidnap for ransom is an age-old peril, the policy has evolved to cover many more threats in line with the increasing sophistication of criminal elements and the broader risks of operating in new, potentially cross-border, business environments,” Mr Smith told Commercial Risk Asia. These perils include, but are not limited to, Illegal detention, virtual kidnap, political and natural catastrophe evacuation, express kidnap and hostage crisis. “This is still a relatively undeveloped market in Asia and although awareness of the cover is increasing, more can be done to promote and encourage companies to protect themselves and their employees, while gaining access to specialist third-party services who assist in pre-incident training all the way through to an incident resolution.” According to Mr Smith, the reaction from the risk managers at the Parima event was mixed, reflecting the different attitudes among corporates when it comes to seeking cover for this type of risk. “While some risk managers are aware of the extent of the risk and the associated cover available, others are surprised at how often these incidents can occur as well as the actual threat levels in neighbouring countries. Any company that operates internationally or sends employees abroad should be considering this type of cover,” he said.

Focus on malicious threats and extortion at Parima Hong Kong breakfast

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