Insurers to sue Worldwide Weather Trading for fraud

A number of insurance companies have been granted the go-ahead by the Nassau County Court in New York to launch a lawsuit against Worldwide Weather Trading (WWT), alleging the company fraudulently sold weather derivatives policies. The plaintiffs will argue that WWT, which ceased trading in 2000, failed to honour the contracts, which are rumoured to have caused losses in the region of $65 million.

The ruling follows years of legal wrangling in which the US insurers, including Diamond State Insurance and Chubb, maintained that WWT entered into weather derivatives contracts only to flee with the premiums. A Chubb spokeswoman said it was not her firm's practice to comment on litigation matters and Diamond’s general counsel also refused to comment.

The insurers may have a hard time suing WWT founder, Harold Mollin, as he is believed to have fled to Thailand following the allegations of fraud in 2000. Mollin did not attend a court hearing concerning the lawsuit last month.

In October 2000, Nebraska’s Department of Insurance revoked Mollin’s insurance agency licence. Mollin registered WWT with the Nebraska department, although he ran the business from a New York office. Neither Mollin nor a designated attorney appeared in court.

Speaking on condition of anonymity, one weather trader told RiskNews that Mollin is thought to have fled to Thailand with anywhere between $10 million and $20 million, following the alleged fraud, adding that other WTT employees were not aware of Mollin’s alleged fraud at the time.

In 1999, WWT said it had arranged weather hedges for Major League Baseball's All-Star game as well as tennis' Wimbledon Championships.

The company also set up a consumer-based weather protection web site, RainDay.com, to provide weather protection for the general public to cover both vacations and important occasions, such as weddings. The venture suffered a setback, however, when the Canadian Broadcasting Corporation (CBC) refused to run an advert featuring a Native American leading a group of senior citizens in a tribal rain dance. The commercial was an affront to Native Americans and the elderly, the CBC said.

RiskNews was unable to reach Mollin for comment.