Kaesong Firms Required to Buy NK Insurance

Korea Times
Na Jeong-ju

South Korean companies setting up operations in the Kaesong industrial complex face difficulties due to a North Korean obligation that they must purchase insurance policies from a North Korean state-run firm.

North Korea demands that South Korean firms have insurance against accidents with a North Korean state-run firm, but they question whether it is financially stable enough to cover all possible accidents.

According to related regulations set up by North Korea last November, South Korean firms in the Kaesong industrial complex must buy insurance policies from North Korean firms. If South Korean companies didn’t follow the rule, they had to pay $10,000 in fines.

South Korean firms regard this rule as unfair.

“We have to buy insurance from a North Korean company despite its inability to cover possible accidents,’’ said an official of a company in the Kaesong complex.

“We have asked the South Korean government to correct this problem because we don’t trust North Korean companies.’’

According to sources, the Unification Ministry, the Financial Supervisory Commission and the Korea Non-Life Insurance Association (KNIA) will hold a meeting today to discuss the matter. The South Korean government has been aware of the problem faced by South Korean companies, but it has delayed notifying the issue to North Korea, the sources said.

“South Korea should have a consultation with North Korea to address insurance matters,’’ a source said. “North Korea may be active in correcting the problem, but it may demand something in return.’’

Currently, a total of 15 South Korean companies have signed contracts with Hyundai Asan, a North Korean business arm of Hyundai Group, to set up a factory in the Kaesong complex. Hyundai Asan has the exclusive rights to develop the Mt. Kumgang tourism complex and the Kaesong complex under agreements signed in 2000.

“South Korean companies have asked the government to check the financial status of the North Korean insurance firm, but they have received no answer,’’ a KNIA official said. “In case of accidents, insurance firms must conduct investigations and check the financial status of policyholders. In this sense, we believe North Korean insurance companies are not capable.’’

North Korea has only one insurance company run by the government, but South Korean companies have little information about it.


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