1. Border Tensions – Executive Liability in Age of Political Unrest

2. Introductions Moderator: Victoria Dearing, Professional Liability Team Leader, Quirk & Company Panelists: Ricardo Cata, Esq., Regional Managing Partner, Co-Chair, Latin America Practice Group, Wilson Elser Moskowitz Edelman & Dicker LLP Jeremy Lang, Vice President and Manager, US Kidnap & Ransom, Hiscox Daniel Wahlig, Senior Consultant, Global Services, Control Risks

3. Agenda The Current Geopolitical Climate Duty of Care and The Legal Climate The Evolution of Kidnap, Ransom, and Extortion Coverage Questions & Answers

4. The Current Geopolitical Climate

5. Kidnap, Ransom and Extortion Risk Globally

6. Kidnaps by Region 2007 - 2010

7. Kidnaps-for-ransom worldwide Top 10 countries in absolute terms 20092010 1.Venezuela 2.Nigeria 3.Mexico 4.Pakistan 5.India 6.Afghanistan 7.Honduras 8.Brazil 9.Philippines 10.Iraq 1.Nigeria 2.Venezuela 3.Pakistan 4.Mexico 5.India 6.Afghanistan 7.Philippines 8.Iraq 9.Colombia 10.Honduras

8. Kidnaps worldwide in 2010 Most common victim types known to Control Risks

9. Kidnaps worldwide, 1998 – 2010 Locals vs. foreign nationals Based on number of cases about which Control Risks has obtained information. True figures are difficult to gauge given that many kidnaps go unreported and public authorities are often unwilling to admit the full extent of the problem.

10. Mexico – Security Risk Zones

11. Mexico The Road to 2012 Mexico is preparing for general elections in July 2012. Attention will focus on the presidential campaign and political maneuvering ahead of the polls. Mounting drug-related violence will remain the main challenge for the current administration. Kidnap Risk Summary In the first half of 2011, 692 kidnaps-for-ransom were recorded by the National System for National Public Security (SNSP), a government department. During the same period in 2010, 652 were recorded

12. Middle East / North Africa – Security Risk

13. Security Evacuations – Travel Security Services Solomon Islands, Apr 06: 5 Fiji, Nov 06: 60 Sri Lank, Jan 06: 10 Haiti, Jan 10: 84 Chile, Mar 10: 3 Peru, 2007 & 2009: 11 Georgia, Aug 08: 2 Indonesia, Jul 09: 7 Kyrgyzstan, Apr 10: 2 Kazakhstan, Nov 06: 116 Lebanon, 2006 & 2008: 379 Guinea, 2007 & 2009: 222 Tunisia, Jan 11: 149 Egypt, Jan 11: 1,250 Côte dIvoire, 2003, 2004 & 2005: 2100 Nigeria, 2006 & 2007: 15 Cameroon, 2008: 6 Kenya, Jan 10: 3 Kuwait, Mar 03: 120 Nepal, Apr 06: 4 Chad, Feb 08: 188 Burundi, Jun 06: 2 India, Nov 08: 14 Libya, Feb 11: 1,500 Tunisia Jan 2011 – 149 Evacuated Egypt Jan 2011 – 1,250 Evacuated Libya Feb 2011 – 1,500 Evacuated

14. Middle East / North Africa the Arab Spring Populism, longer-term instability likely following Arab Spring protests Ten months after unrest first began in Tunisia, popular unrest and clashes continue throughout the Middle East and North Africa. The Middle East has entered a period of seismic change that will dramatically reshape the political, security and operational landscape. The coming years will be a period of significant unrest, as citizens embrace the self- empowering politics of the street. Governments face huge popular expectations that they are unlikely to be able to meet and that will provoke continuing instability. Competition over the nature of evolving state structures, as well as the response of military elites to political and social volatility, could be sources of further flux.

15. Implications for Business Business continues throughout the Middle East and North Africa as countries seek to return to business, however: – Most countries at least at the preparatory stage on Control Risks evacuation monitor with the exception of Morocco and Turkey – Shifting political landscapes require in-depth analysis of potential risks – Corporations need to take the cost of securing their investments into account during the planning stages in order to realize long-term profitability

16. Europe / CIS – Security Risk

17. Europe / CIS Economic concerns the primary driver of political challenges inside the European Union Anti-austerity and pro-reform protest movements remain likely sources of civil unrest

18. Transnational Issues - Corruption UK Bribery Act in short - what you need to know – Bribery of private individuals and companies - The Act has greater width than the US Foreign Corrupt Practices Act (FCPA) in that it covers bribery of private individuals and companies as well as foreign officials. – Corporate failure to prevent bribery - the Act incorporates an offence of corporate failure to prevent bribery. This means that corporations will be liable if anyone acting under its authority – including employees, agents and joint venture partners - is found to be involved in corrupt practices and they do not have in place Adequate Procedures (see below) to counter corruption. – International reach – The Bribery Act covers both UK companies and foreign companies incorporated in the UK, even if offences take place in a third country and are unrelated to UK operations. – Facilitation payments – Unlike the FCPA, the UK Bribery Act covers facilitation payments to speed up routine governmental actions such as customs clearances. – Personal liability - Directors and senior executives will be personally criminally liable if their organisation participated in bribery with their consent.

19. Transnational Issues - Piracy Control Risks' in-house database on global piracy showed that piracy incidents increased 28% during the first half of 2011 compared with the same period in 2010. Somali piracy continues to drive the global increase, accounting for 57% of the global total. Activity in South-east Asia is persisting at a heightened level, with mid-year levels suggesting that 2011 is set to be the third year in a row where piracy incidents increase in South-east Asia.

21. Piracy – Regional Attack Trends

22. Duty of Care and the Legal Climate

23. Its a dangerous world out there… and kidnappings are no exception Of the reported kidnappings between 1992 and 2002: – 77% occurred in Latin America – 15% occurred in Asia (particularly S.E Asia) – 3% occurred in Europe – 2% occurred in north America During the same period, settlements paid were: – 40% were between $100,000 and $500,000 – 12% were between $2 million and $5 million – 30% were $50,000 or less Reported results (admittedly a small %) showed the following outcomes: – 15% released without payment – 7% rescued – 9% killed – 2% escaped – 67% ransom paid

24. What has changed? Newcomer countries, more than half of them in Latin America – Ecuador – Venezuela – Trinidad & Tobago – Haiti – Central America The same reasons – Political effect (Guerrilla and economic inequality) – A profitable business with a relatively quick payoff But also some new ones – Quick payoff with relative low risk (Kidnap Express) – Car-Jacking combined with kidnap (Let the hostage go after an ATM stop and sell the car)

25. Duty of care Corporation duty toward its employees and the public Employers duty to their employees Failure to meet may be considered negligent, and could be held responsible for damages

26. Potential Risks Close to 86% of corporate travelers believe that their company has a legal obligation to support them while abroad 50% of corporate travelers would consider taking legal action in the event of an emergency being mishandled while working overseas. A broad interpretation of the duty of care results in perceived responsibility for: – Local hires and expatriates – Full time employees and contractors – Headquarter employees and Third Country Nationals – Traveling employees

27. Legal Liability Implications Providing appropriate coverage for traveling employees requires not only generic knowledge about the issues but also country-specific knowledge It involves multiple parties with asymmetric agendas – In the home country – In the host country – Law enforcement in host country – Victims relatives It requires specialized knowledge and experience often limited to specialist firms Many of these items are not covered by the companys General Liability coverage…

28. Legal Liability Implications The presence of strict no pay or no-negotiation with kidnappers legal or regulatory mandates Narrow coverage may leave the employer exposed to generic liability Narrow coverage also leaves out valuable services and expertise

29. Legal Liability Implications Curtis v. Beatrice Foods Co 481 F. Supp 1275 (S.D NY 1980) – Duty to negotiate? – Duty to pay ransom? Hargrove v. Underwriters at Lloyds 937 F. Supp 595 (S.D. TX 1996) – Duty to negotiate? – Duty to pay ransom? – Duty to follow local laws and local governments directives? – Duty to warn?

30. Legal Liability Implications Wagner v. Samaritans Purse Case No. 11-cv-3375 (RJS/AJP) (S.D NY) – Duty to tap existing K&R insurance? – Duty to seek experienced crisis management expertise? Executive Order 13536 of April 12, 2010 (Continued on April 2, 2011) – Its effect on U.S. citizens and U.S. entities vis. Negotiating with Somali pirates – Its effect on non-U.S. citizens and non-U.S. entities

31. The Agent & Brokers Exposure General principles of other insurance types can apply to K&R Broker would likely not be exposed unless – the broker misrepresents the nature, extent or scope of the coverage, or – the broker assumes an additional duty by either express agreement or by holding himself out as having expertise in an area beyond what is covered by the policy With respect to an Agent, who operates by and on behalf of an insurer, exposure would be further regulated by contractual or employment agreements

32. The Evolution of Kidnap, Ransom & Extortion Coverage into Crisis Management Coverage

33. K&R: Then and Now The Evolution of K&R: No longer coverage just for those traveling to dangerous countries Once upon a time it was fine to buy it as a packaged product - now stand alone is CRUCIAL Basic coverage: kidnap for ransom, ransom in transit, extortion and illegal detention...HOWEVER... Broad coverage - multitude of endorsements now offered including (but not limited to): threat, disappearance, travel evacuation, express kidnapping, child abduction, loss of earnings, hostage, customer identity threat etc. Named insureds: policy should not leave the insured exposed in any way. If a corporation is buying, it should cover all employees, guests on premises, independent contractors, 1099 employees, volunteers, etc. MUST HAVE A GOOD RESPONSE FIRM ATTACHED

34. Coverage Why K&R? Ancillary Benefits: Peace of mind Exclusive access to a quality response firm Evacuation services (4 th trigger) Threat assessments and security Disappearance investigations Psychological counseling post-incident Travel and accommodation expenses Public relations expenses

35. Response The Response Firm: A good K&R policy should have a top notch, time-tested response firm attached to the policy Some important aspects to be aware of: – The response firm should only employ salaried workers - no subcontracting – Offices around the world should be staffed with analysts AND responders – Must have the ability to deploy anywhere in the world within 24 hours – A viable database filled with up-to-date country specific information – Well rounded in handling prevention and response

36. Trends Who is buying the coverage? Everyone! Schools, hospitals, corporations, houses of worship, high net worth individuals, touring musical acts, television and film companies, NGOs Claims examples: – Disappearance in China – Disgruntled employee in California – US border states – Travel evacuation in the middle east – Express kidnapping in Mexico – Regular kidnapping in Mexico

37. Questions & Answers

38. Many thanks to … Vicky Dearing Ricardo Cata Jeremy Lang Daniel Wahlig