Kim Jong-Il has expressed indignation, fury, and even tested a nuclear device in his attempt to get the US to back down from banking sanctions that has put a damper on his counterfeiting ring, one of the few sources of hard currency North Korea had. Now Kim has a new racket to generate some badly-needed cash, and this time he's targeted the insurance industry:

The cash-strapped regime of North Korea, which has a worldwide reputation for its criminal dealings in weapons sales, drugs and near-perfect counterfeit U.S. $100 bills, may have found a new illicit source of hard foreign currency: international reinsurance fraud.

A growing number of major underwriters around the world strongly suspect that communist dictator Kim Jong-Il's regime is running an elaborate major insurance and reinsurance scam on them, to the tune of tens of millions of dollars or more.

The alleged fraud involves a wide variety of North Korean industrial and personal calamities where insurers have been presented with perfect government-controlled documentation of accidents, including deaths, along with carefully gathered photographic evidence, all compiled in a startlingly brief time.

The major portion of the new fraud appears to be life insurance. This makes sense, because if North Korea produces anything in abundance, it's dead bodies. The government falsifies the causes of death and manufactures evidence in support, and voila! (or the Korean equivalent), Pyongyang gets a check. It's amazing what someone can do when they run all of the official machinery of the state.

Make no mistake about this: Kim is conducting an economic war against the West, albeit a rather low-key and pathetic one. He wants to sap the Western systems for as much cash as he can generate, and at the same time undermine confidence in the same systems. The counterfeiting ring provides an excellent example of this. Not only did he get the cash he needed, he also managed to flood the market with American currency, lowering its value, and called into question its legitimacy.

This again represents a small amount of money overall, but a disturbing development in a market that requires some measure of honesty in the governments that participate in it. Kim has received as much as $150 million in a $1.5 trillian industry, but the number is rising sharply of late. Kim appears to have honed his fraud and is now making it very lucrative -- and his success might get copied by other rogue regimes strapped for cash. The fraud could threaten the stability of reinsurers around the world, making insurance much more costly for everyone with legitimate needs for it. If the trust in this market collapses, it could cause widespread economic damage.

The solution should be rather simple. Insurers should declare all North Korean policies null and void until Kim is removed from office. They should absolutely refuse to pay any claim buttressed by Pyongyang's documentation. Kim may find another scam shortly afterwards, but in the meantime let's shut this one down.

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» Kim's New Racket: Insurance from Bill's Bites
Kim's New Racket: InsuranceEd Morrissey Kim Jong-Il has expressed indignation, fury, and even tested a nuclear device in his attempt to get the US to back down from banking sanctions that has put a damper on his counterfeiting ring, one [Read More]

Tracked on December 5, 2006 1:53 PM

» NoKo Insurance (Big Time Fraud?) from InsureBlog
Why should you care? After all, it's the reinsurers who take the hit, not us, right? Well, no: our own carriers offload much of their risk to these same reinsurers, who will now have to charge more to make up for the NK losses. A double whammy. [Read More]

Tracked on December 5, 2006 7:03 PM

» Kim’s New Racket: InsuranceEd Morrissey, Captain’s Quarters from The Seven Realms
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Tracked on December 6, 2006 12:03 PM