Kidnapping insurance keeps a lid on ransom inflation | Hacker News Reader

Kidnapping insurance keeps a lid on ransom inflation

economist.com

60 pointsthisisit74 comments

When I lived/worked in a high-risk kidnapping environment, I ever got K&R insurance. What I wanted was "retribution insurance" -- some plan which would guarantee some people would investigate and kill everyone in any substantial way affiliated with the kidnapping -- and to loudly communicate the existence of this policy in advance. Being recovered would be great, but having kidnappings deterred entirely would be even better.

US citizenship largely serves this purpose, at least if it's a high profile kidnapping (which any kidnapping in Iraq/Afghanistan/etc. would have been.)

I'm not sure if that would be an effective way to get kidnappings deterred.

There are varied policies on kidnappings, discussed here: https://www.npr.org/sections/money/2017/09/01/548032302/epis...

Interestingly the "no ransoms" policy seems to be quite problematic.

> US citizenship largely serves this purpose, at least if it's a high profile kidnapping (which any kidnapping in Iraq/Afghanistan/etc. would have been.)

Seems it's a double edged sword being a US or indeed a UK or European citizen in places like Iraq/Afghanistan. On the one hand yes your government is a force to be reckoned with, on the other hand it makes you a huge target.

I do however recall reading about the British Empire, where a British botanist was kidnapped by a tribe in Africa. The British army turned up and pounded the hills where the tribe were rumoured to be living with cannon balls continuously for a week. The botanist was let go. Things of course have changed now...I doubt the US or UK government could say to a kidnapper today 'alright we're going to drop artillery on your neighbourhood until you let our guy go'.

> some plan which would guarantee some people would investigate and kill everyone in any substantial way affiliated with the kidnapping -- and to loudly communicate the existence of this policy in advance. [...] US citizenship largely serves this purpose

I'd like to call this the "little madman theory".

> US citizenship largely serves this purpose

Yes. In fact this sort of service has traditionally been one of the main features of any decently functioning tribe.

It is less true nation states. At best aristocrats got such a deal. Which is unfair, but is probably why nation states are more peaceful than small tribes.

One thing I don't quite get...

Say I've kidnapped someone and the ransom has been paid. I could release the hostage but then there would be someone with knowledge of my operation out there walking about.

If I killed the hostage instead, I'll have eliminated that risk and I can keep the ransom. It's not like anyone is going to sue me for not keeping my side of the contract.

Maybe I'm going to get a reputation for killing hostages and people stop paying ransoms, but then I'll just throw away that identity and give myself a new name.

Any game-theorists wish to comment?

Kidnappers are still part of a community and a society. Often they even have political or social goals beyond just greed, or there are others that may get affected by their actions. For example Somali pirates don't each operate completely independently and the actions of one group can very directly affect other groups. So if one bunch of pirates kidnap the crew of a commercial vessel, take the ransom and then kill them, there will be a lot of very upset rival or allied pirates who's chances of getting a ransom payday themselves just got hurt.

Then there's the fact that while the authorities will put in an effort to track down kidnappers and bring them to justice, they'll put in an awful lot more resources into tracking down murderers.

If you do get caught however, for whatever reason, you’ll be looking at a much harsher sentence if you killed your hostage.

There’s also more of a chance law enforcement will continue to look for you if you make the news for murder than if you return the hostage (one can easily imagine it won’t be top priority for them then).

With that said, not all criminals are excellent game theorists...

Not a game theorist, but this is probably the same reason "ransomware" actually does unlock your data if your provide the BTC -- if it didn't, people would not pay. It's market forces at play and is what distinguishes organised criminals from garden variety criminals.

(Sorry if that is stated in the article, but there is a pay-wall.)

But that assumes the kidnappers have a long-term game to play, and need to worry about their reputation, no?

That will be the case at least some of the time, I suppose.

Also, some 'ransomware' never unlocks, even on payment. 'NotPetya' is the famous one, perhaps there are others. A sufficiently spooked victim might behave irrationally and fail to research the ransomware's track record before paying up.

It's not so much as worrying about their personal (gang, group, person) reputation, but rather the reputation of kidnappers in general.

Kidnapping is a business. I would assume people who kidnap others do it more than once. If you want your industry (kidnapping) to continue to exist/be profitable, then would-be-payers must know that they are likely going to get the person(s) back.

Then you have a prisoner's dilemma, no?

To the individual gang, wouldn't it be safer to 'defect'?

Edit or would it be more a tragedy-of-the-commons?

Don't you think that a big chunk, say a majority, of kidnappers would rather not kill anyone and also hold themselves in rather high regard, like "a man of my word" and such things.

Maybe we could call "honor" a built-in game theory heuristic we humans have? After all, we are hardwired to be social.

> kidnappers would rather not kill anyone and also hold themselves in rather high regard, like "a man of my word" and such

You're assuming a certain value-set here. If instead their highest value is to appear ruthless to their peers (think prison, or for that matter the Dothraki), then no.

Well, I think the only value-set they are disclosing here is their desire for money. Assuming nothing "goes wrong", taking the money then reneging on the deal will not get them any more money, and may attract the interest of other kidnappers who have a longer term view.

> taking the money then reneging on the deal will not get them any more money

Unless they reason that killing hostages is safer than releasing them, on account of 'no loose ends'.

> may attract the interest of other kidnappers who have a longer term view

Assuming a highly chaotic environment, this seems unlikely.

Still, that could work out. "I'll kill anyone - if I said I will."

From https://www.aig.co.uk/insights/cyber-ransomeware-disrupts-bu...

> There is no longer a guarantee that insureds will get their data back, even if they pay the ransom.

An actor involved in the kidnappings is the police, that actually does create a 'relationship' with the kidnappers in the long run. This means that killing the hostages reduces the future chances of successful kidnappings.

Kidnapping is a repeat business also.

Second, killing the hostage could make the pursuit a lot more intense: releasing the hostage might put it dead on its tracks . Police has limited resources, and successfully resolved kidnappings are way below murders.

And then, there is actually a human decision of not killing someone. Criminality is not a switch that turns you into a sociopath.

Your doing the right thing by doing a cost-benefit from their perspective, but your completely misjudging the costs of releasing a hostage vs. murdering someone.

Well, that's because you are not thinking criminal enough :)

The modus operandis of commercial kidnappers is to always blindfold the victim in transit to and/or from the hideout, and after a ransom has been collected.

Then of course the victim enjoys very limited freedom to go outdoors while in captivity. Depending on the gang's methods, the hold house could be in the middle of nowhere, or if they are sophisticated enough to buy off the police, in the middle of a busy town.

The key to not getting unravelled is to use multiple hold houses and to routinely transport the victim to a different location by bundling him/her inside the trunk of a vehichle at night.

> The modus operandis of commercial kidnappers is to always blindfold the victim in transit to and/or from the hideout, and after a ransom has been collected.

The fact that kidnappers take measures to minimize a danger is evidence that the danger exists, not of the opposite.

What this makes me think is that the motivation is money, not murder. They may not enjoy the murder, but if it's what gives you a reputation that you should 'pay up', then it's a messy means to and end.

Why would dropping an identity be easier than dropping a physical location? If you change your identity but hang out at the same places you are going to get caught.

Wouldn’t it be much much easier to use a new location for every kidnapping than to do the Hollywood ending?

Somewhat related: http://graphics.wsj.com/hostage/

They shot him a dozen times in the end. Man, when they’ve decided they want you dead (which is what this guy wanted anyway, so no love lost here) they really make sure don’t they!

Tangentially related but very good read.

Thanks for sharing.

Aw great, this is only going to cause MORE kidnappings since thieves will know they can get insurance money.

Before K&R insurers got together, firms and wealthy families were paying badly negotiated sky high ransoms. Now professionals negotiators with ice running through their veins negotiate much better "deals" and also reduce the risk of death by two thirds.

Much lower ransoms should mean kidnapping is less profitable and so supply should decrease (of kidnappings).

if no one paid, there would be no more kidnappings for ransom

If no one undercut, prices for all goods could remain artificially high. Yet, the incentive for the individual firm (and the individual's loved ones, in this case) is to undercut (or pay). An insurance market provides (a) expert knowledge that keeps the price down, (b) an incentivized group that may be able to affect the likelihood of the insured event, (c) a group to provide financial incentives against risky behaviors, thereby pricing behaviors into the market in the same way motorcycle insurance or certain risky living arrangements get priced into the market via their insurers.

The kidnappers can remain irrational longer than you can stay solvent.

Maybe something like the Russian model makes more sense, if not legally. The most deterrent response is to hunt the kidnapers down and exterminate them, not pay them.

Sounds like a great way to get the hostages killed at the same time.

Maybe it would work _after_ the kidnappers have been paid.

But if the hostage takers are dead and other potential hostage taker know this, it would reduce the risk?

Which is great and all, except now your family member is dead, which I’m sure matters more to you than some game theory.

The result of which is everyone is at more risk, including your family in the future.

To the family members, it matters. From the viewpoint of the governement, I'd say it makes sense.

Marvelous.

True, but nobody is going to not pay and sacrifice their life so that hypothetical future people won't get kidnapped.

People are inclined to pay ransoms, so you would have to make it illegal to pay ransom, which would make a disincentive to reporting kidnappings to the police as kidnappers want.

Interestingly in US paying the ransom was illegal, nowadays they are reverting that, since it was highly problematic and resulted to more deaths for the hostages, and longer hostage times. And in the end the ransom often still was paid.

My source (which I have been pasting here already 3 times): https://www.npr.org/sections/money/2017/09/01/548032302/epis...

This might not be true: https://www.npr.org/sections/money/2017/09/01/548032302/epis...

I believe that's the policy that Israel applied with success.

That is not true. Past performance does not predict the stupidity of horrible peoples future actions.

How many of your own family members would you be prepared to sacrifice towards that principle?

Who would ever not pay their own ransom?

Well Getty famously didn't want to pay his grandsons!

And if the insurance companies are limited to a % of paid claims... then they are incentivised to increase the payout and/or # kidnappings. That's a recipe for disaster just like the medical market.

The insurers have been paid in advance. They pay the ransom from their coffers, so are incentivised to reduce the cost as well as keep customers (not fuck to the recovery).

But then interests aren’t aligned. What if the insurance company denies your claim?

What factors are considered in the risk models to price ransom insurance?

Where there is kidnapping insurance, the kidnappers are going to know this in advance, and everyone involved will be the same players over and over. It’s a racket.

Given that K&R insurance actually lowers the ransom amount, wouldn't kidnappers be incentivized to go after people who don't have insurance rather than people who do?

Why go for an unknown amount of money when you can kidnap someone with a guarnteed payout.

Except the insurance policy on a person is cancelled if word gets out that they have it.

Wouldn't certain class of people have a greater propensity of buying this type of insurance. Probably some decent overlap with the kinds of people kidnappers target in the first place?

That differential can be accounted for in the premium, either on an individually underwritten basis or averaged across the risk pool.

That's probably why some of the insurance policies require things like curfews and private security.

The war zone policies often mandated inherently unsafe things (movement only in high-profile armored vehicles, with light security, concentration of protected persons in specific places) when those things were actually by that time less safe than alternatives (low profile vehicles, dispersion).

Presumably these companies would be at a competitive disadvantage to insurance companies that are better at mitigating risk. How are they able to stay in business while requiring unsafe behavior?

Unsafe practice is probably cheaper and clients do not know any better - to them show of security is better than actual security.

That said, some unsafe practices as mentioned become the only choice - when you're high profile enough, obscurity will not work.

Yes, the way the insurers do things was essentially due to "principal-agent" issues, difficulties enforcing standards, and some (related) regulatory issues. Still, it led to less safety.

The insurance company is paying for the outcomes, not the security. The security is a condition of their coverage. They don't benefit from the cost savings, but they are hurt by the lack of safety.

Most places, where kidnappings happen often, have the same result: victims end up dead regardless of a paid ransom and not notifying police. The only place where most victims end up alive and unscathed once the victims' families pay the ransoms is the Philippines. Not totally sure why. Maybe it's because most of the kidnappers are professional soldiers instead of random gangs?

the article states the opposite: 9% of those who don't have K&R insurance come to some form of grief vs. 2% of those with K&R insurance (worldwide stats, assumably?)

Maybe they also group this together with kidnappings by relatives for a financial scam? That would explain better treatment in the stats. (imo this should also be treated separately, though not sure when we don't have access to the data.) On a related note, kidnappings in the West will also probably skew the data since most of it is done by divorced parents who don't custody. Rape also has a much larger stigma outside of the West. That aspect of the kidnapping may be hidden due to culture.

I'm also very unfamiliar with kidnappings in India and the surrounding regions.

I just know that the Philippines is special place when it comes to kidnapping; victims were rarely harmed in any way as long as the ransom demands were met - after negotiation of course. The exception happens when terrorists in the southern most region are the kidnappers.

That website is TERRIBLE to read. Please fix your UX!

https://streamable.com/q8xu0

Please don't use allcaps for emphasis on HN: https://news.ycombinator.com/newsguidelines.html

Just be happy you weren't on mobile trying to read that abomination of a website.

I can't imagine haha - can you post a screenshot now I'm curious

closing the two modals is too hard?

Way back, I had an 18yo Colombian gf whom I considered visiting under the assumption of buying reasonably-priced, short-term K&R insurance. At the time, Colombia was the top kidnapping spot, more-so than anywhere in the Middle East or Africa, because the FARC was funding their operations through drugs and ransoms. Even though she lived in the safest and most protected area, there was the risk of problems in transit in Bogota or Medellín, or merely visiting anyone or traveling inland or at night. I strongly considered it given how hot she was then, but then I met someone else whom I had more in common with and no language barrier. Long-distance physical relationships might just be an oxymoron. ;]

Seems like it would have been way cheaper to just buy her a plane ticket to the US.

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