Posts Tagged ‘insurance’


Britain bans ransom payments by insurance companies to terrorist groups

May 25, 2015

Earlier this year, Parliament passed a measure that prohibits insurance companies from paying ransoms to terrorists and provides for penalties if they do. The bill was debated in January, but it was not clear to Money Jihad at the time that the bill actually passed. The reliable Tom Keatinge has let us know that, yes, the bill has been enacted.

For more background on the law, check out Foreign Policy’s report on the subject from Jan. 8.

British legislators are considering a new bill that takes aim at a small, secretive niche in the insurance industry that deals with kidnapping and ransom, the latest money spinner for terrorists.

The new counterterrorism bill, proposed in November and being debated this week in the House of Commons, gives the British government broad powers to address new terrorist threats posed by the rise of the Islamic State.

One of the most controversial provisions would give ministers the ability to block British citizens suspected of fighting for terrorists from returning to the United Kingdom. Another section would require universities to limit the number of “extremist” speakers they host on campus.

But one part of the proposed bill that has gotten less attention would also make it a crime for British insurance companies to reimburse families or companies that pay a ransom to a terrorist in order to secure the release of a hostage. Critics argue that the provision is misguided, that it will do little to stem the flow of money to terrorists, and that it could disrupt the thriving industry of “kidnap and ransom” insurers and negotiators who successfully get people out of hostage situations.

Companies buy this insurance for employees working overseas who are in danger of being taken captive by terrorists, militants, or criminals. If that happens, the insurer connects the company to negotiators to help executives or families make a deal with kidnappers, send payment, and get the hostage back.

Kidnapping and ransom policies have come under scrutiny recently as British and U.S. counterterrorism officials have taken a stronger stance against paying ransoms to terrorists in order to starve Islamist militants of an important new source of funding. The Islamic State has used kidnapping for ransom to underwrite its gory campaigns in Syria and Iraq. A United Nations report in October estimated that the Islamic State had received $35 million to $45 million in ransom payments in the past year.

U.S. officials have long argued that making ransom payments encourages more kidnapping (though that hasn’t stopped Washington from acquiescing to ransom payments). The U.N. passed a resolution in January 2014 to discourage countries from meeting ransom demands, but a New York Times investigation published in July revealed that many European countries have been covertly making payments…


Money scheme: Russian mafia conducts tutorials on how to commit car insurance fraud in U.S.

May 6, 2013

“People would be very shocked to know who is involved,” with the growing number of fraudulent claims, says an insurance industry expert.  Indeed.  From WCCO, the CBS affiliate in Minneapolis, earlier this year:

MINNEAPOLIS (WCCO) – Mark Kulda of the Insurance Federation of Minnesota says anyone involved in even a slight car accident could be at risk for insurance fraud.

“You might be driving down the street and maybe have a very minor accident and that could trigger a case where there could be insurance fraud,” Kulda said. “People would be very shocked to know who is involved.”

Organized crime involved in insurance fraud has gone up from 16 claims five years ago to 53 in 2011.

“There’s evidence that the Russian mafia is here in south Minneapolis setting up fake clinics, staging fake accidents, overbilling, billing for accidents that never happened,” he said.

The criminals cash in by making out on staged collisions and fake personal injury claims – getting as much as $40,000 per person.

“There’s direct evidence to show that those fraudsters are coming here to Minn. and setting up shop,” he said…


Video: examples of car insurance fraud

May 4, 2013

Staged accidents.  The “swoop & squat.”  Fake “paper cases.”  It’s a growth sector and revenue generator for organized crime.  You pay the price in increased premiums.  From KSAT in San Antonio earlier this year:


Islamic website condemns insurance

January 18, 2012

Many Muslims detest conventional, Western insurance.  On Dec. 23, the Daily Hadith posted this critique:

Insurance has Gharar

Abu Hurairah (radi Allahu anhu) narrated: “The Messenger of Allah (sal Allahu alaihi wa sallam) prohibited sales of ‘whatever a pebble thrown by the seller hits,’ and sales in which there is chance or risk (Gharar).” [Sahih Muslim]

Gharar is chance or risk, meaning it is not known whether it will come to be or not, such as selling fish in the water or birds on the wing. It includes transactions of unknown things, the particulars of which are not fully comprehended by the buyer and seller.” [Reliance of the Traveller by Ahmad ibn Naqib Al-Misri]

“There are certain types of sales and transactions prohibited in Islam. Insurance is one of these. In addition to the fact that insurance is usurious (involves Riba), buying and selling insurance policies is also unlawful because of the Prophet’s prohibition of sales in which there is Gharar.” [Reliance of the Traveller by Ahmad ibn Naqib Al-Misri]

“Urging the permissibility of insurance, one Muslim modernist has written that the very precise statistical data possessed by insurance companies concerning the probabilities of various eventualities makes what they are selling determinately known (Ma’lum). This argument fails when one realizes that statistical data from a group of events yields probability figures that, properly speaking, are a description of the group as a whole, and are only analogically applied to the individual events within it. When generalized to similar groups of events in the future, such probabilities yield commercially useful knowledge about the likelihood of a particular outcome for these future groups. But they cannot and do not tell what the outcome will be for any particular member of the group, in this case the particular insurance policy. Thus, a “17% probability” that circumstances will enable one to collect such and such an amount on a policy is a mere description of the whole group of previous policy holders in similar circumstances, which does not tell whether one will collect the amount or not. One may collect a certain amount or may not collect it, which is precisely the Gharar that is unlawful.” [Reliance of the Traveller by Ahmad ibn Naqib Al-Misri]

Those who support sharia finance point to gharar as a major problem in conventional finance, putting gharar alongside the “sins” of riba and gambling.  Although gharar is often characterized as uncertainty or risk, Vincent Cornell’s Voices of Islam, Vol. III offers a more precise explanation of gharar as deception:

The Prophet Muhammad, may peace be upon him, said, “Do not contract to buy merchandise on the way too market, but wait until it is brought to the market [so that its fair price is established].”  The Prophet also said, “It is impermissible to sell a thing if one knows that it has a defect, unless one informs the buyer of the defect.”  These traditions are examples of ethical exhortations against the practice of gharar.  The majority of Islamic scholars consider gharar as “both ignorance of the material attributes of the subject matter of a sale, and the uncertainty regarding the availability of its existence”…  Gharar literally means “deception.”  Hence, the best definition of gharar in business is “deception based on preventable ambiguity or uncertainty.”

Insurance has been a central part of sparing people from the loss of property, life, and limb since the days of Benjamin Franklin.  Islamists don’t just hate women in bikinis.  They hate the very basis of our legal and economic system.


Islamic insurance risky except to sharia advisers

November 16, 2011

Wednesday word:  takaful

Sharia law bans conventional insurance policies because Muslims think insurance involves uncertainty, gambling, and interest charges.  The substitute that the sharia financiers have come up with to replace insurance is takaful.  Dar & Moghul define takaful this way:

Islamic cooperative insurance is not a contract of buying and selling, where a party offers and sells protection and the other party accepts and buys the service at a certain cost or price.  Rather, it is an arrangement, whereby a group of individuals each pay a fixed amount of money, and then compensation for losses of members of the group are paid out of the total sum.

This chart from a presentation by Islamic finance lecturer R.A. Sarjoon helps distinguish between conventional insurance and takaful in the eyes of Islamic financial experts:

Diagrams of conventional insurance & takaful

The problem with takaful is that it gives the sharia law advocates and advisers yet another opportunity to distort financial markets with awkward, inefficient models that enrich themselves while spreading sharia law concepts deeper into society and farther throughout the world.

Whenever an Islamic financial product is pitched by the men on the business side of Islamic financial firms, they have to go to their sharia advisory boards and ask the members to sign off on the proposals.  When the product is structured on the borderlines of Islamic law, it gives the sharia advisers outsized influence over the final business decision on the structure of the product.  The controversial products probably help deliver more fees to the sharia advisors as well, because their services are called upon more often to bless off on the structure.  The sharia advisers like innovation in financial products because it gives them the opportunity to meet more often to deliberate on the sharia compliance of the proposed products, they can claim more expenses, and it helps justify the payments the sharia advisors receive from the Islamic firms, etc.

Takaful is a potential bonanza for the sharia advisers.  They can offer their services not just to Islamic banks, but to insurance companies as well.

Read more background and news about takaful over at Shariah Finance Watch.

* Dar, Humayon A., and Moghul, Umar F., The Chancellor Guide to the Legal and Shari’a Aspects of Islamic Finance (Great Britain: Harriman House, 2010).


GZM financier charged with insurance fraud

August 30, 2011

Anwar al-Awlaki has urged Muslims living in the West to participate in the money jihad by stealing, scamming, and taking advantage of whatever financial benefits they could extract from their host nations.  Specifcally, Al-Awlaki says that taking money from disbelievers is the “best and purest form of income” and quoting a Hanafi scholar, that stealing from people in the dar al-harb “is considered mubah (permitted) just like hunting or wood gathering.”

A primary financier behind the Ground Zero Mosque turns out to have done something like what al-Awlaki recommends.  Hisham Elzanaty apparently raked in $5 million by orchestrating a network of fake companies and clinics to submit bogus car insurance claims.

Many thanks to Sadie for sending this in:

Allstate has become the latest insurance company to accuse Hisham Elzanaty, one of the money men behind the so-called Ground Zero mosque development, of orchestrating a “highly developed and sophisticated kickback scheme” that allegedly reaped more than $5 million for Elzanaty and others. State Farm and Geico have also lodged similar allegations against Elzanaty.

According to Allstate’s complaint, filed in the U.S. District Court for the Eastern District of New York, Elzanaty and several others allegedly conspired with a licensed medical doctor to incorporate four professional service corporations and set up a scheme that took advantage of New York’s no-fault automobile insurance laws.

The complaint said the bills generated by the doctor, Jadwiga Pawlowski, were submitted to and paid by Allstate. However, Allstate argues the “lion’s share” of the funds collected were siphoned to a management company owned and controlled by Elzanaty.

The complaint also accuses Elzanaty of setting up a corporate entity that allowed him to open up several more medical professional service facilities and to “serve as the corporate veil behind which Elzanaty perpetrated the other aspects of his multimillion-dollar enterprise of fraud.”

In addition to Elzanaty, the complaint names Pawlowski, and others and several of the medical services facilities. The complaint accuses Elzanaty and the rest of the defendants of violating federal laws covering interstate commerce, racketeering, unjust enrichment and mail fraud. The complaint also alleges the defendants violated New York’s common law fraud and no-fault laws.

Can anybody still seriously believe the GZM-backers claims that they would raise the money for the mosque through donations “from Muslims in the neighborhood“??


Lloyds assures it insures no terror

June 26, 2011

English whorehouse Lloyds of London will fight the assertion that their insurance claim payouts fund terrorism.  However, it is difficult to understand how paying a ransom to a terrorist on behalf of a insured client who has been abducted does not fund said terrorist.

Insuring against the ransoms of the sea jihad has turned out to be quite lucrative for the insurance salesmen and pirates.  Piracy insurance also enables governments to relieve themselves from the unseemly public spectacle of negotiating with or paying terrorists with tax dollars.

The piracy insurance boom is a logical outcome of the sea jihad, and the blame should fall mostly on the jihadists themselves.  But lets not kid ourselves about who is being enriched when ransoms are paid.

From Bloomberg on June 17 (h/t The Terror Finance Blog):

Underwriters at Lloyd’s of London, the world’s oldest insurance market, are reviewing the assertion of a U.S. lawmaker that ransoms paid to Somali pirates may fund a terror group, which would stop insurers covering the costs.

Kenya’s government estimates 30 percent of the ransoms are channeled to al-Shabaab, Representative Ed Royce said at a meeting of a subcommittee of the House Committee on Foreign Affairs on June 15, according to a transcript on Bloomberg. Al- Shabaab is described as a terror group with links to al-Qaeda by the U.S.’s National Counterterrorism Center.

“We would not necessarily be able to indemnify ship owners if they paid a ransom to a terrorist group, if that turns out to be the case,” said Neil Roberts, the senior executive for underwriting at the Lloyd’s Market Association in London. “If they can’t get their ship or crew out they may have to decide on re-routing, with implications for costs that would be passed on to the wider economy.”

Somali pirates attacked 154 ships this year and hijacked 26 vessels as of June 13, according to data from the International Maritime Bureau’s Piracy Report Centre. Ransoms rose 36-fold in five years, averaging $5.4 million a ship, and hijackings reached a record last year, according to One Earth Future Foundation, a non-profit group based in Louisville, Colorado.

Al-Shabaab commanders have spoken of a “sea jihad” and opened an office to coordinate with pirates, Royce told the hearing this week, according to the transcript. Royce, a California Republican, is chairman of the Terrorism, Nonproliferation and Trade Subcommittee.

Piracy costs ship owners an estimated $160 million a year in additional insurance expenses, Roberts said. The U.S. bans ransom payments to pirates, while the U.K. bars giving money to terror groups, he said. There have been an estimated 130 ransoms paid to pirates since 2005, Roberts said. The association represents underwriters managing gross premium income of 23 billion pounds ($37 billion).

Pirates increased attacks seven-fold between 2007 and 2010 and doubled their area of operation to cover 2.5 million square nautical miles, according to Royce.


Insuring against the risks of sharia

February 1, 2011

Has your business been damaged or your loved one injured by a protester?  Worry no more, because civil unrest within the Islamic world has led to yet another insurance invention:  riot insurance.

From ANSAmed on Jan. 24 (h/t GoV):

Algeria: Insurance Firms Prepare Coverage against Riots

ALGIERS, JANUARY 24 – Insurance companies operating in Algeria are to ask the authorities for permission to launch a new product offering coverage to public customers against potential disorder and riots. Insurance of this kind currently exists only for businesses.

The announcement was made by the Director General of Alliance Assurances, Hassen Khelifati, during a press conference marking the launch of a new insurance contract with Renault. Demand for this type of product, he added, increased significantly after the latest unrest to break out across Algeria at the beginning of January. An official request will be made to the Ministry of Finance in the next few days.

Let’s just leapfrog over all these single-issue insurance policies and create comprehensive jihad insurance that would provide compensation to victims and their families for hijackings, beheadings, abductions for ransom, piracy, and wife beating.


Piracy spawns booming insurance sector

November 23, 2010

A finance industry publication called Out of the Storm News published an illuminating interview on Nov. 8 with executive Greg Bangs about the growing market for piracy insurance.  Rather than get slowed down, shipping companies would rather pay ransoms as quickly as possible to their crews’ Muslim captors, necessitating a typical insurance policy of $3-5 million in coverage.

Naturally it’s a good market for insurers.  But it’s even better for the pirates.  In its entirety:

Pirates and Piracy Insurance

By Lena Goodwin

The majority of pirates come from Somalia, which has not had a functional government in more than 15 years.  At current, pirates in this region are holding 19 ships with 428 hostages.

The primary industry at target appears to be oil tankers — however it is not the oil the pirates are after, but something more valuable, the people.  The loot these days is in the ransom.

If there is a delay in shipment, companies lose money, so the reality is that most companies choose to pay the asked ransoms.

And as a result, piracy insurance was born.

We recently captured an interview with Greg Bangs, Worldwide Product Manager for Crime and Kidnap and Ransom Insurance, at the Chubb Group of Insurance Companies, regarding his thoughts on pirates, insurance and the current trends in this market.

OOTS:    Do you feel piracy is on the rise? If so, why?

GB:        Piracy is definitely on the rise and is a huge problem in Somalia. As of nine months 2009 there were 34 hijackings, compared to 35 hijackings for the same period this year.  Although this is a seemingly slight rise in hijackings, the organization of the attacks is better both in development and execution. The region suffers from two distinct monsoon seasons which hampers the pirates’ efforts during the summer and the winter periods. But, as soon as the monsoon seasons pass, the attacks increase.  We are also seeing the attacks increase in Nigeria and Indonesia.  The pirates are getting more aggressive; they are boarding vessels, assaulting crew members and stealing from the ship itself.

OOTS:    What are the main items stolen, the most valuable loot, as it were, and why?

GB:        The most valuable “item” is clearly the crew. The vessel and the cargo are important, but the pirates’ primary reason for hijacking the ship are the people on board and the hefty ransom they hope these individuals will bring.

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