Kidnap for Ransom as a Business

Trading hostages is a highly complex economic transaction, yet most hostages are successfully ransomed. This suggests that there are effective institutions governing the market for hostages. Private governance solutions can emerge spontaneously through repeated interactions, but local norms and institutions would not automatically extend to transnational kidnaps. This chapter introduces insurers as providers of governance in the transnational market for hostages. To create a profitable insurance product, insurers help the insured to prevent kidnaps and resolve the relatively few abductions that occur. Kidnap insurance obliges or encourages the insured to use a wide range of associated services that order and stabilize the market for hostages. The well-governed markets for protection and hostages underpin desirable economic activities such as international trade, investment, development, and aid.