Mick Hartley

How to keep a struggling economy going. Well, there's forgery, or drugs, or selling nuclear equipment, or plain old nuclear blackmail. Also, insurance claims. Back in January 2007:

North Korea, the last Stalinist dictatorship, is fighting a £30 million legal battle with insurance syndicates at Lloyd’s of London, which accuse it of making fraudulent claims in an attempt to prop up its collapsing economy…

The state-owned Korea National Insurance Corporation (KNIC) is demanding €44 million in a London court from a group of reinsurers, including Lloyd’s syndicates, for damage caused in a catastrophic helicopter crash in 2005.

The North Koreans have supplied exhaustive documentation and their claims have been authenticated by independent loss adjusters and upheld in a North Korean court.

Upheld in a North Korean court? What more proof of probity could you want?

But the reinsurers argue that the nature of the regime makes it impossible to trust and that the claim is a fraudulent one intended to bring in desperately needed foreign exchange.

“It’s not possible for the North Korean regime to do anything legitimate,” says Michael Payton, of the law firm Clyde & Co, who is representing a group of reinsurers, including Allianz of Germany. “We are very concerned about the circumstances of the claimed loss.”

The accident took place in April 2005 when, it is claimed, a helicopter owned by Air Koryo, the North Korean state airline, was dispatched from Pyongyang, the capital, to collect a woman who was in labour with triplets from a remote island. On the return flight it crashed into a warehouse on the outskirts of the city, causing a fire that destroyed a large amount of humanitarian relief goods.

A plausible scenario, I think we can all agree. The triplets are a nice touch.

The KNIC settled an insurance claim by the airline, which had compensated the owner of the warehouse, and claimed this back from its London reinsurers. According to the contract, disputes were to be settled under North Korean law and last month a court in Pyongyang ordered the reinsurers to pay the North Korean company the €44 million. They refuse to do so.

According to a source close to the reinsurers, the comprehensiveness of the documentation provided by the North Koreans, including photographs of the accident site and exhaustive lists of all the materials lost, was in itself unnatural and a reason for suspicion.

And the outcome, announced this week:

A group of international reinsurers has reached a settlement with the Korea National Insurance Corporation (KNIC) over a reinsurance claim that the group had earlier said was fraudulent.

The reinsurers will pay the state-owned insurer almost all of the claim, KNICs lawyers said, which arose when a helicopter allegedly carrying a pregnant woman to hospital crashed into a Pyongyang warehouse in 2005.

"The reinsurers and their lawyers … agreed to retract and withdraw all allegations of fraud and impropriety against KNIC," KNIC's lawyers said in a statement on Wednesday.

Insurer Allianz's lawyers confirmed that there had been a settlement, but declined to give further detail. The court could not immediately be reached for comment, though court documents confirmed details of the hearings.

The reinsurers would pay 95 percent of a 44 million euro ($56.91 million) claim, KNIC lawyers said.

Allianz also declined to comment further on the settlement, which was reached after hearings before London's Commercial Court….

KNIC, which has a state monopoly for granting insurance within North Korea, was demanding payments in euros, as fixed in the reinsurance contract — a hard currency, and therefore a commodity in short supply in North Korea.

The lawsuit is one of several which North Korea is pursuing, with claims exceeding $150 million dollar according to some estimates, involving several calamities.

More here.