Nigerian local insurers discussing partnership with UK firms on terrorism and kidnapping insurance would need to watch new legislations coming from the UK government on the emerging challenges.
The UK government has moved to ban the reimbursement of terrorist-related kidnap and ransom payments by insurers. The insurance industry has however downplayed the impact of the change on the kidnap and ransom insurance market.
The proposed change in the law was outlined in a speech by Theresa May, Home Secretary and is contained in the new Counter-Terrorism and Security Bill, which was introduced to the Commons recently.
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.
based insurance companies to pay claims related to ransom payments to foreign terrorist organisations.
Firms from Asian and UK markets have for some time now coming to x-ray the Nigerian market and to
concretize partnership deals that would enable them play in the market, since capacity is very limited or
completely absent.
concretize partnership deals that would enable them play in the market, since capacity is very limited or
completely absent.
This, they believe, has become necessary in view of growing insecurity in the country exacerbated by the activities of Islamic sect Boko Haram.
May, the home secretary in her speech according to Commercial Risk Europe publication, said that the bill
would amend existing laws to make sure UK-based insurance firms do not provide cover for the payment of
terrorist ransoms.
would amend existing laws 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.
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.
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.
“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.
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 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.
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.
“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.
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.”
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.
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.
said.
Also, Maplecroft revealed that 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.
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.
Oladipo Bailey, former commissioner for insurance and executive vice chairman of one of the broking firms,
said at one of the strategic meetings with a foreign partner in Lagos that Nigerian insurance companies
needed partnerships with foreign firms to develop the local market.
said at one of the strategic meetings with a foreign partner in Lagos that Nigerian insurance companies
needed partnerships with foreign firms to develop the local market.
He said: “we need to build the reinsurance capacity to underwrite the risks in terrorism and kidnapping.”
Bailey stated that partnering with the Asia-based reinsurance brokers given their rich experience in the
global insurance market including the Lloyds of London would help local insurers understudy their experience, build skills and key into growing risks for protection of citizens and assets.
global insurance market including the Lloyds of London would help local insurers understudy their experience, build skills and key into growing risks for protection of citizens and assets.
Sam Onyeka, assistant director of inspectorate, National Insurance Commission (NAICOM), said no insurance market anywhere in the world can comfortably write terrorism risk without the support of the state.
Onyeka, who described the role of government from the perspective of public risk mitigation, stated that it was a necessary intervention to make the cover available and also sustainable. “This is the only way we can start to build local capacity,” he said.
Source:
BusinessDay
BusinessDay
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