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North Korea’s Insurance Fraud

Posted December. 06, 2006 06:57,   


North Korea, which has been accused of forging checks and trafficking drugs, is now suspected to have fabricated the level of damage and the condition of accidents in order to receive significant compensation from international reinsurance companies.

Fox News proposed the suspicion on December 4, saying that Korea National Insurance Corporation (KNIC), which is taking charge of insurance affairs in North Korea, increasingly claimed large amounts of money as compensation for a helicopter crash or a ferry accident to reinsurance companies including Lloyd’s of London.

According to Fox News, the amount North Korea requested from the companies is $150 million (approximately 142.5 billion won).

The reinsurance companies began to suspect and inspect the possibility of a North Korean scam when a medical rescue helicopter crashed in North Korea in July 2005.

KNIC requested $50 million when submitting the report to the company in London at that time. KNIC claimed that the helicopter had crashed into a government-owned warehouse which stored disaster relief supplies and had set it a fire. Also, it submitted a detailed report of loss including hundreds of thousands of children’s gloves, soaps, and handkerchiefs. It only took 10 days for North Korea to hand in the report. It would have taken a few months for any other country.

However, the experts on analysis of insurance damage scrutinized the photos of the devastation North Korea reported and concluded that the warehouse could not support the high volumes of relief supplies that were claimed to be there before the fire. The documents were perfect, they pointed out, but the loss was overestimated.

The ferry accident in April this year is another example of this allegation. North Korea requested $6 million and declared that 129 people died after a ferry struck a rock near the coast of Wonsan and all of victims were automatically covered with life insurance as they bought a ferry ticket.

Insurers asked for permission to send a diver to investigate the accident to the place. But North Korea refused.

“It is impossible to check without the support of North Korean government, which is thought as certain to be involved in insurance claims,” says Michael Payton, who represents several of the major British insurers. He adds, “Reinsurance companies recently have begun to discuss the scale of loss which might come as a result of business in North Korea.”