The Korean Don

This report is highly troubling on several levels. Fox News is reporting the high level of suspicion in the international reinsurance community that North Korea is running a very elaborate - and lucrative - insurance scam. It is troubling on the level of seeing a nation being run as a straight-up criminal enterprise. The other troubling aspect is that the international insurance and reinsurance markets are even doing any business with this nation.

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.

That paperwork is coupled with a resistance to letting foreign insurance adjusters examine some of the most crucial physical evidence, except after long delays and under a watchful eye, if at all.

The growing concern in the reinsurance industry is that the property damage being claimed is vastly overstated, and the circumstances of some alleged accidents may have been altered, or that deaths for which insurance payment is claimed may have had nothing to do with the accidents.

Death is hardly a rare thing in North Korea, where millions are estimated to have expired from famine, flood and government repression in the past decade — but the number of apparently ordinary people in the dictatorship who have suddenly been found to have foreign-backed life insurance is raising insurers' eyebrows.

The chief concern is that only the Kim Jong-Il regime — a government that is known to be brutal, unscrupulous and desperately short of foreign currency — controls the information required to trigger the payments.

According to Michael Payton, a lawyer who represents several of the major insurers, the full extent of the reinsurance claims may involve more than $150 million. U.K. insurers facing these claims have only just begun to talk to each other about the potential scale of their North Korean losses.

North Korean insurance risk is also handled in a wide variety of other Western European markets, and as far away as Russia, India and Indonesia.

So far, there is little attempt to begin discussing the fraud possibilities across those national boundaries.

"I've never seen anything like it before," said Payton, senior partner in the London-based international law firm of Clyde & Co., which specializes in insurance law. "The apparent involvement of the state in every detail of these claims, coupled with the impossibility of obtaining the usual corroborative facts independent of the state, makes these claims unique, in my experience."

The suspected scam involves the huge international market for reinsurance, in which insurers reduce their risk on every kind of accident, from environmental catastrophes and crop failure to airline and auto crashes, by reselling much of their policy exposure to other syndicates of insurers outside their own countries. Huge sums are routinely covered in reinsurance; globally, the reinsurance market last year was valued at some $1.5 trillion.

North Korea is starving its own people to death and international insurance companies are doing business with Kim's government? What the hell? You know, there were banks and insurance companies that did business with Nazi Germany, too. This is disgusting.