K&R insurance policies typically cover the perils of kidnap, extortion, wrongful detention, and hijacking. K&R policies are indemnity policies - they reimburse a loss incurred by the insured. The policies do not pay ransoms on the behalf of the insured. Typically, the insured must first pay the ransom, thus incurring the loss, and then seek reimbursement under the policy.
Losses typically reimbursed by K&R insurance include:
- Ransom Monies - Money paid or lost due to kidnapping
- Transit/Delivery - Loss due to destruction, disappearance, confiscation, or wrongful appropriation of ransom monies being delivered to a covered kidnapping or extortion
- Accidental Death or Dismemberment - Death or permanent physical disablement occurring during a kidnapping
- Judgements and Legal Liability - Cost resulting from any claim or suit brought by any insured person against the insured
- Additional Expenses - Medical care, PR counsel, wage and salary replacement, relocation and job retraining, and other expenses related to a kidnapping incident.
The policies also typically pay for the fees and expenses of crisis management consultants. These consultants provide advice to the insured on how to best respond to the incident.
The number of piracy events, which were originally restricted to the Gulf of Aden region and have extended to the whole Indian Ocean area, has increased significantly during the last few years and standard marine policies have started to exclude piracy risks from their cover. As a consequence special ship-owner K&R insurances have been developed. These policies cover consultant fees, loss of income and crew support in addition to the ransom payments.
There is a multitude of available covers available on the market who are however, often difficult to compare, especially as they are not standardized in their conditions.
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