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Thursday, June 18, 2009

Mitch sends along this fascinating article about North Korea and reinsurance fraud.

"The exact scale of the fraud is hard to determine . . . because the insurance industry has been so gullible," Asher said. North Korean insurance fraud "was absolutely something I should have been looking into more when I was running the [State Department's] illicit activities initiative," he added.

Some details emerged in London last year when lawyers for German insurance giant Allianz Global Investors, Lloyd's of London and several other reinsurers disputed a North Korean reinsurance claim for the 2005 crash of a helicopter into a government-owned warehouse in Pyongyang. According to court documents, the companies alleged that the helicopter crash had been staged, that a North Korean court's decision to uphold the claim had been rigged and that the North Korean government routinely used insurance fraud to raise money for the personal use of Kim Jong Il.

A British appeals court allowed the case to go forward, but as it went to trial in December, the insurance companies agreed to a settlement that amounted to a nearly complete victory for the North Koreans: The insurers retracted all allegations of fraud against Korea National Insurance Corp. (KNIC) and paid out about $58 million, or 95 percent of the North Korean claim for the crash.