UK government plans to ban insurance kidnap and ransom payments

The proposed change in the law was outlined in a speech by Home Secretary Theresa May on Monday and is contained in the new Counter-Terrorism and Security Bill, which was introduced to the Commons on Wednesday. The Bill, which introduces a raft of counter terrorism measures, would make it a criminal offence for UK-based insurance companies to pay claims related to ransom payments to foreign terrorist organisations. In her speech, the Home Secretary said that the Bill will amend existing law to make sure UK-based insurance firms do not provide cover for the payment of terrorist ransoms. She said that the government wants to put an end to uncertainty about insurance and reinsurance payments for kidnap and ransom to help prevent an important element of terrorist financing. Despite the proposed change, the insurance industry says that the new law will have little impact on kidnap and ransom insurance. Experts note that the vast majority of kidnappings are not perpetrated by proscribed terrorist organisations, that it is already illegal for UK-based insurers to underwrite ransom payments to terrorist groups and that policies include standard exclusions.hide"The payment of ransoms to proscribed terrorist organisations has, for some time, been prohibited by UK legislation and by sanctions issued by the United Nations as well as the US and the EU," said Doug Milne, Chief Executive Officer at Special Contingency Risks (SCR), a unit of Willis. But, according to Mr Milne, clarification of the issue under proposed changes to the law is welcome. While it is illegal to underwrite ransom payments to terrorist groups, the Bill will close a legal loophole that allows insurance companies to recompense individuals who have paid ransom payments. Hiscox, a major provider of K&R insurance, also welcomed the clarification. "For some time the UN has prohibited the reimbursement or payment of ransoms to proscribed terrorist organisations, and Hiscox, like the rest of the London Market, operates under these parameters," said Bronek Masojada, Chief Executive of Hiscox in a statement. "We welcome the clarification the UK government is proposing. It reflects our approach and we will continue to provide our clients with the support and expertise they need, should the worst happen," he said. Lloyd's said that it has been in dialogue with the UK government on the issue for some time and that discussions are ongoing. However, a statement from the Lloyd's Market Association (LMA) suggests that insurers would be concerned if the changes do not tally with those in other countries. Neil Smith, the LMA's head of underwriting, said: "We believe any changes to UK legislation need to be replicated throughout the EU and the US, or the intended effect of this legislation will not meet its stated aims." Risk consultancy Maplecroft noted that without a unified international approach to banning ransom payments through intermediaries or insurance companies, the Bill would not achieve its goals. Most G7 countries have yet to prohibit ransom payments and governments and individuals continue to pay ransoms to secure the release of hostages held by terrorist groups. For example, the French government has paid al-Qaeda in the Islamic Maghreb at least $58.1m in ransom payments between 2010 and 2013. Switzerland, Spain and Austria have paid out $21.5m to the terrorist group between 2008 and 2010. A further $20.4m has been paid by Qatar and Oman, which acted as intermediaries to free an Austrian, Swiss and two Finnish nationals from Yemen's Al-Qaeda affiliate between 2012 and 2013. According to Maplecroft, the Bill will not limit the ability of private parties to finance ransom payments. Privately-funded ransom payments are believed to be frequently utilised to enable the release of hostages, it said. According to Maplecroft, kidnappings by terrorist groups have increased substantially in recent years. There were 30 incidents recorded in 2014, compared with 23 incidents in 2013 and 16 recorded in 2012. Overall, 171 foreign nationals have been taken hostage in 2014, surpassing the 44 abducted in 2013 and the 75 kidnapped in 2012. Kidnappings by terrorist groups like Islamic State (IS) are likely to increase in the short to medium term because they help drive recruitment and provide a source of financing, according to Maplecroft. According to the UN, IS has received $44m in ransom payments in the last year alone.

UK government plans to ban insurance kidnap and ransom payments

Want to read this article?

Read Next

Helvetia restructures for international growth, adds risk management to board

Switzerland’s Kessler rolls out ESG ratings to pension funds

Alstom becomes latest firm to register French captive

Amrae names new board members

Brazilian states return to court to double dam collapse compensation to $19.5bn

Helvetia restructures for international growth, adds risk management to board

Switzerland’s Kessler rolls out ESG ratings to pension funds

Alstom becomes latest firm to register French captive

Amrae names new board members

Brazilian states return to court to double dam collapse compensation to $19.5bn

Want to read this article?

Read Next

Helvetia restructures for international growth, adds risk management to board

Switzerland’s Kessler rolls out ESG ratings to pension funds

Alstom becomes latest firm to register French captive

Amrae names new board members

Brazilian states return to court to double dam collapse compensation to $19.5bn

Related Articles