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Risk and Insurance Considerations
Employees on Overseas Assignments
Foreign Voluntary Workers Compensation Coverage
Kidnap & Ransom Risk
Business Travel Accident Coverage
Presented September 24, 2013
Jeffery Bond – AIG Worldsource
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Introduction
• For multinational companies, protecting human capital
has become an integral part of their risk management
strategies. With more and more employees traveling
and relocating overseas, protecting the personal safety
and well-being of these employees is critical for
companies to succeed in today’s global business
environment.
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Employee Classifications
• U.S. Employee: An employee who is a citizen or legal resident of the U.S. wherever hired or an
employee who is a U.S. hire who is not a U.S. citizen whose contract of hire was entered into in
the U.S.
• US Employee Traveler A U.S. Employee who is hired for, and assigned by you to work
primarily within the United States who is temporarily in the Coverage Territory while on a
Business Trip for you
• Canadian Employee An employee who is a citizen of Canada wherever hired and an
employee who is a Canadian hire who is not a Canadian citizen and whose contract of hire was
entered into in Canada
• Canadian Employee Traveler an employee who is a citizen of Canada wherever hired and an
employee who is a Canadian hire who is not a Canadian citizen and whose contract of hire was
entered into in the Canada
• Third Country National An employee, who is neither a U.S. employee, Canadian employee,
nor Local Hire or National, who is hired or assigned by you to work outside of his or her country
of hire or permanent residence if other than the U.S. or Canada.
• Local Hire or National is an employee who is hired by you to work within his or her country of
hire or permanent residence and whose usual workplace is located in the Coverage Territory.
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Determining Options
• What is the nationality of the employee?
• Where is the payroll generated and reported (benefits)?
• Is the assignment temporary or long-term?
• Will the employee be taking a personal deviation or returning home
during the trip?
• Will they be traveling or working in high risk areas?
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Coverage Options
• US Statutory Workers Compensation Policy
• Foreign Voluntary Worker Compensation Endorsement on US Domestic WC policy
• Standalone Foreign Voluntary Workers Compensation Coverage.
• Local Statutory Compensation Coverage for Third Country and Local Nationals
Defense Base Act and Jones Act Coverage
• Kidnap and Ransom
• Business Travel Accident
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Why purchase a FVWC Policy?
• Certainty
• Domestic WC carrier may only provide FVWC extension on their program for incidental travel.
• Specific state or country laws may limit extra territorial coverage.
• Definition of extra territorial coverage will vary by state.
• Employer’s Liability coverage may not be provided for an overseas incident.
• Coverage
• Travel specific issues, such as endemic disease vary by state or may not be available .
• Executive officers, sole proprietors and partners may not be covered on the Domestic WC policy.
• Employers Liability coverage may not be available or limited for injury overseas
• Medical Evacuation and Repatriation in the event of an injury may not be covered.
• Coverage is not granted for local hires or third country nationals ( Reverse Trip Travel )
• Lack of Travel and Medical Assistance to coordinate employee care and ensure proper Duty of Care
• Ease and Flexibility
• Domestic WC Policy may only can provide indemnification for overseas expenses, not pay on behalf of.
• Overseas medical providers may not recognize coverage or payments made by a Domestic WC Carrier.
• Claims can be resolved more quickly than typical workers comp schemes as it is not subject to
governmental administration or approval.
• Losses do not effect Domestic Workers Compensation Experience Modification Factor.
• As coverage is voluntary, benefits can be provided in a different fashion than as legally mandated .
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Foreign Voluntary Compensation/ Employers’ Liability
• FVWC policy is not a statutory workers compensation policy and is not
meant to replace or meet any statutory obligations.
• The benefits payable under the policy are calculated in accordance with the
benefits available under the workers compensation law of the state or
country of hire of the employee “as if” the employee was eligible for the
benefits of that state.
• The policy also extends additional coverage beyond what is provided under
statutory workers compensation policies, adding an extra layer of protection
for the employer and the employee. – Coverage for Endemic disease
– Medical Repatriation Expense
– Travel Assist Service
– AD&D Coverage
– Reverse Trip Travel
– 24/7 Travel Accident and Sickness Coverage Option
– Security Evacuation Coverage Option
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Foreign Voluntary Compensation – Part One
.
• Pays on your behalf compensation, medical and other benefits of
the Employment Injury Benefit for employment-related injuries.
• Employment Injury Benefit is Calculated Based on benefits of State, Province or
Country of Hire
• Benefits can be paid on a Primary Basis unless the employee
makes a claim for statutory benefits.
• Coverage is 24/7 for Employment related injuries.
• All claims are evaluated under the following:
• Was the employee in the course and scope of their employment furthering the interests of the
employer.
• Was the activity which caused the injury an activity which could be reasonably expected while the
employee was traveling?
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Foreign Voluntary Compensation – Part One
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• Supplemental Repatriation Expense
• For a covered Injury pays for expenses related to repatriating a covered
employee to their country of citizenship, hire or permanent residence.
• We will pay excess the normal cost of transporting the employee if he was not
injured up to the Limit of Liability.
• Key Exclusions to Part One:
• Payments in a jurisdiction where this policy is prohibited by statute, regulation
or local law.
• Statutory benefits under any compulsory local scheme – i.e. Domestic WC law,
UK EL, etc.
• No War or Terrorism exclusion applicable to Part One
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Foreign Employers’ Liability – Part Two
• Covers suits against the insured for injury arising out of the course of
their employment to an Covered employee.
• Key Exclusions:
• Payments in a jurisdiction where this policy is prohibited by statute, regulation or local
law.
• Statutory benefits under any compulsory local scheme – i.e. Domestic WC law, UK EL,
etc.
• War and Terrorism exclusion applies but can generally be removed by endorsement.
• Federal Acts including:
• USLH (includes DBA)
• FELA
• Migrant & Seasonal Workers.
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FVWC Best Practices
• Enhanced Coverage for Travelers – Coverage for Endemic disease
– Medical Repatriation Expense with Per Person Limits and No Aggregate
– Employers Liability coverage.
– Travel Assist Service provided by Service Provider
– AD&D Coverage for both occupational and non-occupational
– Repatriation Coverage provided for work-related injuries and possibly for non-occupational.
– Reverse Trip Travel for Foreign Based Employees traveling into the US or Canada.
– 24/7 Travel Accident and Sickness Coverage Option including 14 day personal deviation.
– Family Travel Benefits in the event of an injury.
– Security Evacuation Coverage Option
• International Claims and Travel Assistance Service – Dedicated Center of Excellence Claims Team
– Access to Travel Assist Websites including security alerts, pre-trip planning and country
profiles.
– Worldwide global claims network with access to local providers, counsel and adjusters.
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Kidnap and Ransom Coverage
• Reasons for
Kidnapping
• Kidnapping Trends
• Who is Responsible
• Areas of Greatest Risk
• New Developments
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Reasons for Kidnapping
• They are all economic in nature…
• Drug Cartels – Mexico
• Quick Money – Low Level Criminal Gangs
• Religious Insurgencies – funding Al Qaeda,
Abu Sayyaf and Boko Haram
• Guerilla Groups – FARC, MEND, insurgent
groups focused on economic issues in their
countries
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Trends
• Kidnap for ransom has increased 70% in the last 8 years (Source: Lloyds of London)
– Highest Frequency in Venezuela, Mexico, Nigeria & North Africa
– Significant Domestic Activity
– Kidnappings of foreign nationals worldwide have increased by over 60% in the past
five years.
– Involve Wealthy Individuals
– Most common victims include dependants and business employees.
• Size of ransoms have increased - $5M avg.
– Largest known ransom demands worldwide in the past five years ranged between $20
million and $125 million.
• Relatively very small numbers of kidnappers are ever caught
• The price of releasing a hostage can range from large cash payments to requests for
“cab fare”
• Kidnappers are becoming more aggressive and greedy
• Kidnapping is a way of life in some countries
• 15,000 to 20,000 kidnaps annually – many go unreported
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Target Selection
• Wealth – Whether is Real or Perceived
• Type of Vehicle – Color, Popularity and
Frequency of Theft
• Political – any ties?
• Publicity
• Routine – Time and Place – are they
predictable?
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Who is Responsible? – Threat
Sources
• Drug Cartels (i.e. Mexico)
• Organized Criminal Gangs
• Low Level Criminal Groups
• Street Gangs
• Insurgency
• Corrupt Law Enforcement
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What makes a country a Kidnap
Danger Zone?
• Areas of greatest risk
• Political Unrest or Upheaval
• Extreme Poverty
• Questionable Rule of Law and Judicial
Process
• Weak Democratic Institutions
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Risk Areas 2012
• Severe
– Mexico
– Venezuela
– Afghanistan
– Pakistan
– Colombia
– Somali waters
• High Risk
– Philippines
– Sahel Region
– Yemen
– Nigeria
– Iraq
– Somalia / Kenya
– Democratic Republic of Congo
– Sudan and South Sudan
– Syria
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New Developments
• Children as Targets
• Social media as a way to track
• Middle class as targets (i.e. Mexico express kidnappings)
• More amateur involvement
• More violence
• More extortion
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K & R Incidents by Region
As shown in the graph, the most dangerous region for K & R of the cases recorded was South West Asia, particularly the Pakistan/Afghanistan border. North Africa & Middle East came second with 25% and Africa third with 15%. Though Latin America placed fourth with only an 11% share, in reality it should be far higher, as most cases concern domestic nationals and thus go largely unreported in the media.
1% 11%
25%
14%
40%
9%
Latin America
North Africa & MiddleEast
Africa
South West Asia
South East Asia / AsiaPacific
Europe
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Incidents Kidnapping Outcomes
2011
As shown in the graph, of the cases recorded the majority of K & R incidents ended in a ransom being paid to the group, followed by a release without payment (12%) and victim successfully rescued (11%). A minority but still considerable proportion of cases ended with the victim being killed at 9% (some of which during a rescue attempt). Victims are rarely able to escape successfully (2%).
65%
13%
9%11%
2%
Ransom Paid
Release withoutpayment
Killed
Rescued
Escaped
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Kidnap Ransom
• Are you prepared to ensure the safe, timely and secure release of a
victim?
• Could you effectively liaise with all parties (law enforcement,
families, other third parties)?
• Can you cover the costs associated with a kidnap, extortion,
detention or hijack event?
– Fees of a crisis management and kidnap response firm
– Independent communicator
– Interest on loans raised to meet an insured loss
– Travel costs to the country of which the event occurred
– Independent psychiatric care and/or medical care
Terms/Exclusions
• Low Limits
• Specifically Excluded Country Endt
• Subject to a country travel advisory
– Travel to any country after an advisory has
been issued
– Failure to evacuate from host country within
ten ( 10 ) days after issuance of advisory
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Extortion
• Payment demands following a threat to cause bodily injury of an insured person
• Threats may also be damage of property, contamination of products, exposure of trade secrets, destruction of electronic data, cyber sabotage or terror
• Divulge any confidential, private or secret information unique to the insured person(s)
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Wrongful Detention
• Involuntary confinement
by a government entity or
insurgent group resulting
from an arbitrary or
capricious act of an agent
or with the tacit approval
of said entity or
organization
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Hijacking
• Illegal holding under
duress of an insured
person for more than six
hours while traveling on
any aircraft, motor vehicle
or airborne vessel
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Kidnap Ransom
As kidnap, detention and extortion events become more of a reality for companies
operating in both foreign and domestic markets, the need for expertise in protecting those
assets becomes critical.
Kidnap, ransom and extortion insurance is the only way to manage the consequences
associated with a kidnap, extortion, detention or hijack. It provides the protection and
peace of mind needed.
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Kidnap Ransom
• Ransom / Extortion payments
• Death or dismemberment benefits
• Loss in-transit of payment / delivery
• Judgment, Settlement and defense costs
• Related Expenses
– Ex. Travel, Crisis Response Team, Psychiatric, etc…
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Related Expenses
• Consultants
• Salary continuation
• Personal financial loss
• Medical expenses
• Rest and rehabilitation
• Travel and accommodation
• Loan interest payment
• Reward
• Interpreter
• Forensic analysis
• Other reasonable and necessary expenses
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Kidnap and Ransom
Role of the Consultant
Assessment of the situation as it develops
Formulation of an effective response strategy
Communication with the perpetrators and handling the threats
Dealing with the media, local and international authorities and legislation
Care of victim’s family members and other employees
Preparation for ransom payment and safe release of the victim(s)
Future risk mitigation
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Endorsements
• Child Abduction
• Threat
• Express Kidnapping
• Evacuation and repatriation
• Hostage Crisis Response &
Expenses
• Assault Expenses
• Legal Defense outside Limits
• Medical Expenses – extended
period
• Value of Products
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Risk Management
• Planning a kidnap can be
difficult and complicated
or easy (depending on
source and nature)
• Why kidnappers rarely
fail!
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Kidnap Avoidance – Five Basic Mitigation
Principals
• Stay Informed
– Know the Country
– Know the Risks
• Information Security
• Stay Unpredictable
• Stay low key
• Stay Alert
• Have a Plan ( Evacuation Plan )
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Customer Profile
• Any company with employees either traveling to or based overseas, particularly Latin
America, Asia, Eastern Europe, Africa
• Officers and directors
• Cash rich or high-profile individuals or companies
• Situations where families are accessible
• Student groups
• Families, relatives, residents of household, guests
• Relief or charitable organizations
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Business Travel Accident
• Travel insurance is insurance that is intended to cover medical expenses,
unexpected costs incurred before or during your trip ( ie including lost baggage and
trip cancellation ), and other losses incurred while traveling, either within one's own
country, or internationally.
• Source: http://wwwnc.cdc.gov/travel/yellowbook/2012/chapter-2-the-pre-travel-
consultation/travel-health-insurance-and-evacuation-insurance.htm
• Why should I a traveler or company buy travel insurance ?
Travel insurance offers travelers coverage for unforeseen problems, from a cancelled
flight to a serious illness—or in rare cases, even an act of terrorism or the financial
default of a travel supplier. If an illness, accident, or other covered unforeseen
circumstance forces a traveler to cancel or interrupt their travel plans, they face two
potentially major financial losses—money invested in nonrefundable pre-payments
and medical expenses that in many instances may not be covered by health
insurance.
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Business Travel Accident
• The most common risks that are covered by travel insurance are:
– Medical emergency ( accident or sickness )
– Emergency Evacuation
– Repatriation of remains
– Return of a minor
– Trip Cancellation/Trip Interruption
– Accident death, injury or disablement benefit
– Overseas funeral expenses
– Lost, stolen or damaged baggage, personal effects or travel documents
– Delayed baggage (and emergency replacement of essential items)
– Flight connection was missed due to airline schedule
– Travel delays due to weather
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Optional Coverage
• Some travel policies will also provide cover for additional costs, although these vary
widely between providers.
• In addition, often separate insurance can be purchased for specific costs such as:
– Pre-existing conditions ( ie. Asthma, diabetes )
– Sports with an element/high hazard ( ie skiing, football, scuba diving, zip lining,
etc… )
– Travel to high risk countries ( ie due to war, natural disasters or acts
of terrorism )
– Additional Accidental Death & Dismemberment coverage
– Acute on-set of pre-existing conditions - This term is very different from Pre-
existing conditions. It means a sudden and unexpected occurrence of pre-
existing medical conditions without any prior warning from a medical
professional. Travel insurance companies, especially in USA, do not offer
coverage for pre-existing coverage but they do offer coverage for acute on-set of
pre-existing conditions. If you have pre-existing conditions, make sure to get this
coverage to protect yourself against any emergency situation that arises due to
pre-existing conditions in spite of taking care
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Common Exclusions
• Pre-existing medical conditions but a lot of companies now cover for "acute
on-set of pre-existing conditions"
• War or terrorism - but some plans may cover this risk, and some do cover
for acts of terrorism
• Injury or illness caused by alcohol or drug use
• Usually, the insurers cover pregnancy related expenses, if the travel occurs
within the first trimester. After that, insurance coverage varies from insurer
to insurer.
• TAS endorsement is critical because not every occurrence is covered by
FVWC such as non-occupational events such heart attack, appendicitis,
pancreatitis, etc. Having a TAS along with FVWC provides a complete
package of benefits.
• Travel insurance can also provide helpful services, often 24 hours a day, 7
days a week that can include concierge services and emergency travel
assistance.
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Business Travel Accident
A dedicated Travel Risk Consultant will assess every aspect of a clients
program including:
• Communication Strategies
• Travel Policies & Procedures
• Conduct interviews with HR, Security and Risk Managers
• Perform gap analysis
• Compare with industry best practices
• Compile report to review findings and recommendations
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Business Travel Accident
• Customized Country Reports
– If a client is traveling to a specific country, a customized pre-trip country report can be provided to include:
• Case Coordination – Evacuation/Case Management Process Map
• Evacuation Procedures
• Detailed Country Map
• Pre-Trip Information includes:
– Recommended Vaccinations
– Infrastructure
– Cultural Consideration
– Risk Rating
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Carrier Considerations
• Experience
– New to market or history of
writing this class of business
• Consulting expertise
– Pre/post event client briefing
– Home security analysis
– Close personal security for
travel to hot spots
– Staff on the ground in hot
spots
• Coverage territory
– Ability to write and respond
• Willingness to write relief or
charity organizations
– Non-governmental
organization
– Volunteers may not be
covered – make sure they
have coverage
• Liberal coverage
– Definition of named insured
• Financial strength
– Can they offer the limits that
your clients will really need?
Other Considerations
• What is their Global footprint?
• Do they have access to regional
networks?
• Customer Service – Simple?
• Web Presence
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