From Somali Pirates to Ransomware: How Insurance Shapes Modern Crime

Anja, a Professor of Political Economy, shares how an interest in crime and the role of the insurance industry led her to some intriguing moments, including Zoom calls with Somali pirates.

Engaging with ‘shady’ characters

Anja began her academic career by looking at crime from a different angle, first researching how crime and war affect countries’ economies, to quantify the economic benefits of peace. Realising that fighting would persist regardless, she turned her attentions to crime itself.

“I just became really fascinated by Somali piracy in 2010,” Anja says. “I was interested because it was largely non-violent. There seemed to be a protocol where pirates would come on board and take the ship hostage, there would be a negotiation, and eventually the ship would just steam out.”

“The other puzzle was that pirates tied up these multi-million-dollar assets in plain view of the Somali coast and spent many months – occasionally years – negotiating with a ship owner, until somehow, a ransom was paid. And I thought, how does that happen?”

Exploring this led Anja to research underwriting at Lloyd’s of London, an insurance marketplace where underwriters (those who assess risk for insurance policies) work together. She found that they engage with “secretive” professionals and sometimes “shady” characters to negotiate ransoms and extract hostages.

This gave Anja a unique vantage point on an ecosystem of insurance and crime, where legitimate businesspeople interact with criminals to resolve crises and govern in lawless situations. Throughout her work, Anja refers to this as “insurance-as-governance”: where insurers take the place of the state to control situations not conventionally covered by the state.

From Anja’s perspective, this is not really a problem, as significant criminal acts driven by economic interests need to be addressed economically.

“If you just throw money at the problem then everyone will want to get into the kidnapping business. When governments negotiate over one of their nationals as a hostage, it’s not just going to be about money. It opens a whole wish list of things: prisoner releases, policy change, and if money comes into it, it’s very difficult to demonstrate any kind of cash constraint.”

In the US, the state is dealing with their own investigation into the abduction of Nancy Guthrie. Although not piracy, the concepts of kidnap and ransom are similar. “For the US, it would be a complete disaster if the impression was created that you could just take people off the street and hold them for a few days and end up with however many Bitcoins. The state has a responsibility to not make this profitable.”

“Why don’t they just nail art to the walls?”

Through a ransom negotiator she met during her research, Anja was introduced to the world of art theft. Art is usually stolen to be resold, rather than held to ransom – but this too is treated as an insurable problem.

“The integrity of the treasure, whether it’s a person or an artwork, is paramount. You would only negotiate with a captor if the hostage was still alive. And if you were to negotiate the release of a painting – or the amount of a finder’s fee – it would be based on the value of that painting.”

This is why, Anja says, paintings in galleries aren’t nailed to walls. If the process of stealing the painting could potentially damage it, this would increase the loss for insurers compared to a negotiated return.

Anja also became interested in the Art Loss Register, which flags all pieces of stolen and lost art to auction houses and dealers as they do their due diligence on items they sell.

Although there’s less of a market for stolen art – thanks in part to the Register – the recent heist in the Louvre proves that thefts still do happen. The difference is, though, as Anja points out, what was stolen there can be melted down: “I think one or two may have been saved in case somebody needs to drive a bargain over a prison sentence at a later stage, but I don’t expect to see those items in the Louvre again”.

State protection for hackers

Next, Anja focused on a new market: ransomware. When hackers hold companies to ransom, data becomes the insurable interest. And its perpetrators are not hiding in the shadows:

“Normally, if you're doing criminality, then you try and hide it as much as possible. But here they’re saying, we’re LockBit [a Russian cybercriminal group], and this is our software. It’s different because you’ve got states that are protecting them.

On ransomware, typically covered through cyber insurance, the industry is doing less well in governing the market. Insurers unquestioningly paid hackers’ initially small ransom amounts, prioritising business continuity: “Ransoms kept growing and growing. Once the hackers were inside a business, they could look at its profit and loss accounts or charge them a percentage of turnover.”

She adds that cyber insurance is now encouraging hackers to “do ransomware better” as if they “want to have a business, they better make sure that data isn’t wiped when it’s stolen, that it can be recovered and given back to the business.”

Anja’s latest book, We Know You Can Pay a Million, charts the growth of ransomware from acts of mischief in the late twentieth century to the catastrophic impacts it’s had on today’s society.

Recent examples include a significant attack on the NHS, and on M&S, which disrupted the business for months. The reason Anja wrote the book, was to not only provide a history of ransomware, but also to emphasise the human and social aspects of data piracy to help us learn from previous attacks.

“I wanted to write this book as a human-interest story that teaches people the language that they need to engage with their own cyber security. Most of the attacks that we’re seeing are based around social engineering.”

She says there is not necessarily an imminent existential and national threat from ransomware, but it makes sense to think about how our government should prepare and we can learn from the COVID pandemic.

“We know what on the hoof policy making looks like in a crisis. Is this how we want to deal with a national emergency where all or part of the country is without water or electricity? Would it be reassuring to have a plan? I think it probably would.”