On 24 June 2015 President Obama approved Presidential Policy Directive 29 "US Nationals Taken Hostage Abroad and Personnel Recovery Efforts" ("PPD-29") and issued an Executive Order on Hostage Recovery Activities. In the past few days, international headlines have proclaimed that "Obama allows US hostage families to pay ransoms" (BBC), "Obama administration clears way for hostages' families to pay ransom" (The Guardian), "White House Won't Bar Hostages Families From Paying Ransoms" (The Wall Street Journal).

The change in policy is a response to criticisms levelled against the US government by the families of hostages that it was inconsistent, uncommunicative and lacked transparency in its approach to hostage situations. In at least one case, a family was threatened by prosecution under the material support statute (which outlaws payments to terrorists). In a statement on 24 June President Obama said: "...I want to point out that no family of an American hostage has ever been prosecuted for paying a ransom for the return of their loved one. The last thing that we should ever do is add to a family's pain with threats like that."

It is worth noting that neither the Policy Directive nor the Executive Order legalise ransom payments to terrorist kidnappers by family members. In fact, the word "ransom" only appears once in the Policy Directive: "It is United States policy to deny hostage-takers the benefits of ransom, prisoner releases, policy changes, or other acts of concession." As is well known, the US Government has long maintained a "no concessions" policy towards terrorists. US Government public proclamations at least remain that it itself will not pay any ransoms or countenance any other concessions such as a prisoner release, or a pledge not to undertake some type of foreign policy or military action in response to demands from terrorists. In his statement President Obama said "I am reaffirming that the United States government will not make concessions, such as paying ransom, to terrorist groups holding American hostages."

Nonetheless, PPD-29 does not explicitly exclude the possibility of private ransom payments and notes that the default US position "does not preclude engaging in communications with hostage-takers. For example, when appropriate the United States may assist private efforts to communicate with hostage-takers whether directly or through public or private intermediaries...to secure the safe recovery of the hostage." In a press briefing a White House spokesperson sidestepped direct questions about whether private ransom payments would be effectively legalised, but pointed to a Department of Justice statement on 24 June 2015 which reads:

"Perhaps the best indication of how the department will exercise its prosecutorial discretion in enforcing the material support [for terrorists] statute is the department's past record of prosecuting cases under the statute.  The department has never used the material support statute to prosecute a hostage's family or friends for paying a ransom for the safe return of their loved one."

This relaxation of policy towards terrorist groups will ease some concern under K&R policies as to the consequences for insureds of entering into negotiations with terrorist organisations and/or response consultants' role in this process, but says nothing regarding reimbursement of ransoms, or those providing money to families. In our view it is a short step to move from turning a blind eye to the actions of the family to overlooking the actions of those banks/insurers/businesses who made such action financially possible. Interestingly the US appears to be moving in the opposite direction to the UK government on this question, and we would hope this might give the UK government some reason to review their current stance.

Whilst headlines and news articles have focussed on the controversial issue of ransom payments, the White House policy indicates that the US Government will be taking greater control over each and every kidnapping of a US citizen. In particular, PPD-29 establishes a Hostage Recovery Fusion Cell ("HRFC") which "shall serve as the US government's dedicated interagency coordinating body". The HRFC will track all cases of US nationals held hostage, provide regular reports to the President, recommend hostage recovery options and strategies to the President through the US National Security Council, and coordinate various US government departments' efforts to provide "support and assistance" to hostages and their families.

Importantly for K&R insurers, the question will be how far the new US agency will want to be involved in/lead any negotiations where US citizens are involved. The involvement of a governmental organisation in such matters often brings its own challenges.

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