North finds reinsurance a source of hard cash
North Korea has filed claims with British and Russian reinsurance companies after four disasters in the North, and seeks millions of dollars in compensation, a source in Seoul said yesterday. His comments were confirmed by government officials.
The sources said the claims were filed by Minjok Insurance General Company, and asked for payments related to two rail crashes and two other incidents.
Reinsurers help policy-issuing insurance companies spread the risk involved in their policies to other insurance companies around the world. Companies buy “packages” composed of parts of many policies, and share in both the policy payments and claims made under those policies.
The reinsurers reportedly received permission from Pyongyang to conduct investigations at the accident sites before paying the claims; those visits have already taken place, these sources said, adding that the visits were made to places normally off-limits to foreigners.
One of the incidents was the sinking of a passenger ship traveling between Wonsan and Heungnam, both east-coast ports. Half of the ship’s 200 passengers lost their lives, Minjok reportedly told its reinsurers. Industry officials here estimated that the insurance payment would be in the millions of dollars. Another incident was a train accident in South Hamkyong province in April, which resulted in the deaths of 270 soldiers and 400 civilians. Rumors had circulated in Seoul about the latter accident, but those rumors were dismissed at the time by South Korean government officials.
Another train crash occurred near Nampo, a west-coast port, in April. Dozens were reportedly killed in that crash. Little is known about a helicopter crash near Pyongyang in May, these sources said.
“North Korea has been in a bad plight since September 2005, after its assets in Banco Delta Asia in Macau were frozen and the United States announced financial sanctions,” a Seoul official said. “It is my understanding that the North is also trying to press claims linked to flood damage this summer.”
One observer said the North’s rare disclosure of disasters indicates how serious Pyongyang’s cash crunch is. “It means that Pyongyang is more interested in gaining tangible benefits despite the risk of airing its dirty linen in public,” said Yang Moo-jin, a North Korea-watcher at the University of North Korean Studies in Seoul.
Others said Pyongyang may be learning to tweak global financial systems. “North Korean entities have been involved in competition to earn foreign currency, and now one of them is focusing on loss recovery through insurance,” said Lee Yeong-hun, a North Korea economic specialist at the Bank of Korea.
Experts said reinsurance payments to the North are outside the scope of any financial sanctions. “The North is operating all of its legitimate dollar-earning channels at full capacity,” a Seoul official said.
by Lee Young-jong, Shin Eun-jin, Sohn Hae-yong