Probe into involvement of gangsters in Lloyd’s

LONDON, MAR 14: Britain and the United States are investigating whether the Lloyd's of London insurance market is being used by American ...

LONDON, MAR 14: Britain and the United States are investigating whether the Lloyd’s of London insurance market is being used by American gangsters as a cover for scams that could cost hundreds of millions of pounds in lost claims, The Sunday Times reported.

Several British firms have been raided during the four-month investigation, code-named Operation Chain, Lloyd’s spokesman Nick Doak confirmed last night. "We don’t believe that it has had an impact on Lloyd’s itself, in so far as we believe that it is the false use of Lloyd’s security as an insurer which is being investigated,” Doak said, "It is the policyholders who would have suffered any losses.”

The Sunday Times said the fraud is thought to involve bogus insurance companies set up by American crime syndicates registered offshore in the Caribbean which offer to cover aviation and shipping companies and third world governments against losses due to natural disasters, air crashes and shipwrecks.

The bogus firms rent property and other assets fromlegitimate companies to make it appear they have the resources to pay off big claims, the newspaper said. Premiums are collected, but the companies liquidate when big claims are made, leaving clients unprotected, The Sunday Times said.

Other insurance companies are then left to foot the bill through the industry’s safety net plan, and the costs are passed on to customers through higher premiums, the newspaper said.

The paper said the investigation has resulted in arrests by the internal revenue service in the United States but provided no details about when and where they took place.