Governing criminal markets: The role of private insurers in kidnap for ransom

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Abstract


The intersection between the formal and criminal economies presents a range of intractable coordination and enforcement problems. Who orders and facilitates the interactions between private, legal entities, and criminals (potentially) engaged in kidnap for ransom? I analyze the contracts, protocols, norms, and agencies created by insurers to govern this unusual market. Stringent insurance contracts, effective security measures, and orderly resolutions create a profitable market for kidnap insurance. Underwriters manage moral hazard and adverse selection. Business risk consultancies minimize the kidnapping of insured workers, high-net-worth individuals, and travellers. Crisis responders ensure that hos- tages are treated well, keep ransoms moderate and stable, and discourage kidnappers from reneging on agreed ransoms. The state, private sector, and mafias incentivize cooperation and enforce contracts. Understanding this complex polycentric governance architecture is crucial for remedying current trends in “terrorist” kidnap for ransom.
Original languageEnglish
Pages (from-to)341-358
Number of pages18
JournalGovernance
Volume31
Issue number2
Early online date25 Jun 2017
DOIs
Publication statusPublished - Apr 2018

Keywords

  • Private Governance
  • Insurance
  • Kidnap for ransom
  • Policentricity
  • LLoyd's

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