RICHARD Johnson, kidnap insurance executive, recalls losing a client.

The unfortunate policy holder was being held captive in a farmhouse near the Colombian city of Medellin when police stumbled in.

"A lot of bullets start flying. All 12 kidnappers were killed, four of the policemen were killed and my client was killed," said Johnson.

He draws a simple conclusion: "You never want a rescue attempt. Pay the money and get the guy back." He was speaking from the Miami offices of insurance brokers, Seitlin Risk Management, where he is vice-president.

Johnson had just got off the phone with another prospective client in Colombia, which, with about 3,000 kidnappings a year, has by far the world's highest rate.

Kidnap and ransom insurance, known in the business as K&R, covers not only the money eventually handed over to the criminals but also the fees of special hostage negotiation advisors, so-called "crisis response consultants".

Charging about US$2,000 a day, the consultant is typically a man with a background in the US or British security forces, who flies in from London or the US.

When the kidnappers get in touch - by telephone, by radio or in writing - he won't communicate directly with them but instead advises the victim's family or colleagues. They then appoint a negotiator.

Ransom paid

Arguing with the kidnappers helps convince them they have got a good deal and may prevent kidnappers from striking the same family or company again, said Peter Dobbs, a former crisis consultant for London-based Control Risks Group and now an insurance seller.

"A cast-iron rule is that at no time should it appear that money is easy to obtain," said the former British paratrooper.

He said that in 70 to 80 per cent of cases, ransoms are paid, and less than 5 per cent of victims die.

Kidnapping emerged in its modern form in Argentina and Chile in the 1970s but has reached industrial proportions in Colombia, where rebels make hundreds of millions of dollars a year from ransom, according to the charity Pax Christi.

The K&R business, which first developed in response to the kidnapping of US aviator Charles Lindbergh's baby in 1932, has boomed with the crime. More than US$100 million a year is now paid in kidnap insurance premiums worldwide, mostly underwritten by Lloyds of London, industry insiders say.

Taking out kidnap insurance is actually illegal in Colombia, although it is not against the law for Colombians to be insured abroad, a loophole which permits Seitlin's Johnson to admit to having many Colombian clients.

In Colombia no individual or company will ever admit to having insurance. "What insurance ensures is a kidnapping," said a Bogota kidnapping negotiator, who asked not to be identified.

One of his cases was severely complicated by insurance.

"It had been eight months since he was kidnapped, and he cracked and started to talk. He said to them, 'Hey, don't worry; I've got insurance.' He cracked, they didn't, and so they kept him another nine months," he said.

Psychological pressure

Leaks of insurance policy details abounded in 1996, when the wife of a former president of the German company BASF was kidnapped in Medellin and the kidnappers said they knew their hostage was insured for US$6 million.

Colombian rebels, unlike smaller scale kidnappers elsewhere, are easily able to keep their victims for months or years, hiding them in secret jungle or mountain camps.

Aware that families missing loved ones are in more of a hurry than they are, experienced rebel negotiators have become expert in applying psychological pressure.

"When they call, they're very aggressive. They say the victim's sick, he's going to die or he got caught in cross-fire so speed up the negotiations," said the negotiator.

They also wheedle financial information out of the victim.

"They're telling him his wife's spending all the money he worked for all his life; she's got herself a boyfriend," said the negotiator, whose worst case was of a man kept in a pit for five months, eating out of a can lowered to him by a chain.

In 1993, Colombia's government briefly made paying ransoms illegal, but there was an outcry from victims' relatives.

Insurance is not cheap. Johnson said US$1 million coverage for a Bogota family of five costs between US$9,000 and US$12,000 a year.

The K&R business is profitable, and those involved are sensitive to the charge that insurance payouts make kidnapping more lucrative and therefore encourage it. Some companies, such as oil major BP have a policy of not taking out insurance.

Insurers are quick to defend themselves.

"How come I can't sell any of these policies in Chile or Belgium? Kidnapping is caused by socio-economic conditions and corruption," said Johnson.

(Agencies via Xinhua)