PP is amazed that international re-insurance firms have been willing to work with North Korea’s Korean National Insurance Corporation (KNIC).

Why? Well apart from the fact that dealing with KNIC is a clear example of sanctions violation the company has been involved in cases of serious fraud.

And its this fraud in the insurance world that helps make Kim’s nuclear weapons and keeps his missiles flying. And brings a steady supply of Rolls Royces. The regime has many ways of filling their bank accounts not just internet crime and selling coal.

How do they do it?

Reinsurers working with KNIC are putting themselves at risk of extortion by the company which is an arm of the North Korean state. KNIC has made big claims against losses that cannot be independently proven. This forces reinsurers to pay out for incidents that they cannot properly assess or challenge. This is a sneaky way of using the international insurance market to bring $$$ into the cash-strapped state.

What’s the evidence for this? Well PP has done some digging and there’s one very clear example that demonstrates KNIC’s methods:

In June 2017 KNIC through its overseas offices sought more than 12 million euros in settlement for a loss that they claimed occurred at the Sunchon Regional Supply Facility (an industrial center in North Korea). The company put this claim in to reinsurance businesses overseas. Reinsurance firms would normally seek to verify claims like these independently before paying anything out. Otherwise they would be simply taking an insurance company’s word for the fact that they took a loss. But how do you verify a claim that comes in from North Korea?

The answer is that its extremely difficult. Particularly when you are not able to trust the government to back up an independent investigation. Because KNIC is a government entity and is being used to generate illicit revenue by the regime it is able to use its governmental control as a mechanism to ‘verify’ any claims which benefit the government. Upon any questioning from reinsurers the DPRK government works hand-in-hand with KNIC to block attempts to reject false claims or to fully investigate.


After months of providing incomplete documentation for the Sunchon Regional Supply incident and refusing independent outside verification of the loss KNIC continued to pressure the reinsurance companies involved to pay out their portion of the 12 million euros. Some of the companies paid out these claims while others continue to resist. Those that did pay described KNIC as ‘aggressive’ in their pursuit of the claims. PP is unsure why they cooperated but they may have seen a payout as their only option. KNIC’s officers reportedly made efforts to ruin the reputations of the companies as non-payers and openly questioned their credibility when they asked for proof of the losses.

Evidence of the problems that can arise when reinsurers do business with KNIC is also shown well by the long dispute between KNIC and a group of major international reinsurers including Allianz Global Corporate & Specialty AG, Generali, Lloyds (Hardy Underwriting), Lloyd’s (Atrium), Belgium’s Aviabel, the General Insurance Corporation of India and Misr Insurance of Egypt. KNIC’s claim that a helicopter had crashed into an insured warehouse in 2005 was claimed to be fraudulent by the reinsurers. KNIC’s claim was upheld in court.

The scam cost the reinsurers a shocking total of $58.2 million.

If PP ran a company that had signed a contract with KNIC we would fire our due diligence researchers on the spot.

Article on KNIC winning their case

The EU gets involved

The fact that KNIC funnels money into DPRK’s nuclear weapons program is clear. The EU sanctioned the company and the English Government froze all of KNIC’s assets because of this – https://www.theguardian.com/uk-news/2017/apr/23/uk-freezes-assets-of-north-korean-company-in-south-london-insurance-nuclear-weapons.

The UK subsidiary director Ko Su Gil left the country soon after. England is not the only jurisdiction that has taken the concrete steps against KNIC, as four Hamburg based KNIC associates were forced to leave the country.

The EU’s regulation document against KNIC noted that “KNIC GmbH, as a subsidiary controlled by KNIC headquarters in Pyongyang…a government entity, is generating substantial foreign exchange revenue which is used to support the regime in North Korea”. The EU’s note also drew a link between KNIC and the regime’s infamous “Office 39”. Six individuals were designated as a result of the KNIC EU listing: Kim Il Su, Kang Song Nam, Choe Chun Sik, Sin Kyu Nam, Pak Chun San and So Tong Myong (the CEO of KNIC in the DPRK).

Serbian insurer fights back

KNIC’s malpractice has not ceased in recent years even with a much bigger international spotlight on its action. In 2017 KNIC entered into a dispute with a major Serbian reinsurer called Dunav-Re. Dunav-Re legitimately and legally refused to service a claim made by KNIC through an Indian Insurance company. KNIC aggressively tried to leverage its relationship with that company to put pressure on Dunav-Re after the Serbian company cited UNSCR 2321 to justify a suspension of payments to KNIC. KNIC asserted to them the Dunav-Re had freely entered into a reinsurance contract and that any attempts to reverse the payment under the pretext of sanctions would not be accepted or tolerated.

This kind of pressure puts re-insurers into a challenging legal position. These kinds of disputes can cost millions in time effort and legal costs to resolve.

The fundamental problem in PP’s opinion is that due to the closed nature of the DPRK independent checking of insurance claims made by the KNIC is almost impossible to achieve; especially when it is working closely with the DPRK government to actively defraud the market.

A defector told South Korea’s Yonhap news agency that: “In North Korea there is only one state-owned insurance company, so that even if it fabricates an accident there is no way to verify the claims…after purchasing international insurance or reinsurance for state infrastructure, documents are forged (on alleged accidents), which earns the state tens of millions of dollars a year”.

70 years of funding the DPRK

KNIC celebrated its 70th anniversary on July 23 2017 and was described by the DPRK leadership as ‘a powerful economic means which can contribute to the building of [the] socialist economy’. In PP’s opinion its also a powerful economic means to steal money from international businesses and to rip off reinsurance companies around the world.

Quite a lot is possible when you have a regime at your back that is happy to commit fraud on an industrial scale.

Re-insurers beware!

More from us soon…