News Non-Life01 Jul 2020

China:Claims made on insurers in fraud cases unveiled in US-listed Chinese companies

01 Jul 2020

Claims have been lodged against China's biggest non-life insurer PICC P&C and several other insurers in a second separate fraud case in three months involving a Nasdaq-listed mainland Chinese company.

In this latest case, the insurers provided cover for gold inventory that turned out to be fake.

The “gold”, owned by Wuhan-based Nasdaq-listed Kingold Jewelry, one of China's largest gold jewellery manufacturers, was pledged as collateral for loans totalling around CNY20bn ($2.8bn) from at least 14 Chinese financial institutions, including several trust companies.

Kingold allegedly used 83 tonnes of gold bars as collateral, which later turned out to be gilded copper, according to a report by South China Morning Post citing the Caixin news outlet.

Kingold though strongly denies any wrongdoing and is being investigated by the authorities, according to Caixin.

The fake gold was exposed in February when Dongguan Trust set out to liquidate Kingold’s collateral to cover defaulted debts. Late last year Kingold allegedly failed to repay investors of several trust products.

Creditors have demanded that PICC cover their losses. But local media reports cited PICC as saying that the insured, Kingold, has to make a claim. Kingold, though, has yet to lodge a claim.

Luckin Coffee

The news follows an announcement in April by Nasdaq-listed Luckin Coffee’s recent fraud case that had involved faking sales figures by as much as CNY2.2bn last year. The false figures add up to nearly half of the total sales reported last year.

Luckin is claiming on directors' and officers' liability insurance policies as class action suits are lodged against the company. 

Ping An and 10 other insurers are in a consortium to co-insure Luckin for D&O liability for up to $25m. Ping An said that its share in the co-insurance is at most $2m.


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