Comprehensive cover may solve Korean plight

SEVEN years after the thawing of the Cold War, North Korea, the last of the old-style Stalinist republics, is still one of the most mysterious and impenetrable countries in the world.

In Pyongyang, the scrubbed and gleaming capital, a handful of diplomats from neutral and former Communist countries go quietly about their business under discreet surveillance. Foreign journalists are seldom admitted; the few tourists and businessmen who visit are steered around a circuit of approved sites under strict supervision.

Even the spy satellites of the Western intelligence agencies are unable to provide more than vague clues about the ways of the ruling Workers' Party, and the "Dear Leader", Kim Jong Il. But in the last two years, the government has extended a welcome to an unexpected group of partners: British insurance men who, Pyongyang believes, may provide an escape from the pit into which the country has dug itself.

For this has been the loneliest and most ruinous period since the Korean War. In 1994, four decades after founding his "workers' paradise", Kim's father, the "Great Leader" Kim Il Sung, died, leaving an alarming power vacuum. Depleted by shortages of fuel and raw materials, the economy has rusted to a virtual standstill, hamstrung by archaic technology and a lack of foreign exchange. Finally, last summer, torrential floods washed away an already feeble rice crop, leaving 500,000 homeless and causing an estimated pounds 10bn of damage.

The North's traditional alliances have fizzled out, as China and Russia have moved closer to the capitalist economies of Asia and the West, including its hated cousin, South Korea. But early in his reign Kim Il Sung took an unexpected and little-known precaution. Despite a lifetime spent propagating the doctrine of juche, or self-reliance, the Great Leader did what every good father does for his family: he took out an insurance policy.

Since 1957, the government has been insuring ships, buildings, factories, livestock and crops through the state-owned Korea Foreign Insurance Company. But in a collectivist economy, where the government effectively holds in one pocket what it is insuring from another, this would be self-defeatingly circular. So the KFIC reinsured a proportion of its risk, much of it on the European market.

For years the arrangement worked smoothly enough. But in 1994, the country's mountainous rice farms were struck by spring floods, then a drought, then summer floods, and finally autumn typhoons. Last year, the floods were even heavier, and as the rains came down, so did the claims from the directors of the ruined collective farms. Enter the insurance men from London.

Since 1994, the twice-weekly flight from Peking to Pyongyang, North Korea's main link with the outside world, has transported growing numbers of brokers and loss adjusters, dispatched by the European reinsurers to assess the KFIC's claims. Satellite photographs have been scrutinised, and inspectors have been given unprecedented access to remote corners of the republic. Brokers are reluctant to discuss the exact scale of losses, and in so obsessively secretive a country, precise figures are hard to come by. But the disasters are described as "catastrophic" by Brent Demnar, an Australian loss adjuster.

After being burned once, the reinsurers redrew the contracts to exclude most kinds of flood damage. Even so, a syndicate of European insurers, brokered by the British companies Fenchurch and Bain Hogg, anticipates losses variously estimated at pounds 30m to pounds 50m on damage to property alone. Commercial Union faces a bill of more than pounds 4m as its contribution towards a pounds 14.5m computer centre which burned down in Pyongyang earlier this year.The preliminary conclusion is that, at the height of the bitter winter, with fuel shortages leaving most buildings unheated, the sprinkler system froze up.

Other landmarks insured on the London market include the People's Opera House and the People's Department Store. When the contracts come up for renewal in June, the KFIC is certain to face even tougher premiums. "You're looking at losses from those floods of pounds 80m, and at least half of that was reinsured on the London market," says Alan Bennett of brokerage Swire Fraser. "For every pound you get in premiums, you're probably looking at pounds 200 in losses."

But the arrangement suits both sides. For Europeans, the strict American embargo on virtually all commerce between North Korea and the US enables them to make inroads into a virtually untapped market. "The potential is enormous," says Mr Demnar, "and all the basic machinery is there, although it's decades behind even somewhere like eastern Europe. What they need is an enormous injection of capital."

Therein lies the attraction of insurance. With help from Fenchurch and Swire Fraser, the KFIC has an extraordinary ambition: to draw in foreign funds by establishing itself as an international insurer. "They have an image problem," admits Mr Bennett, "and it is going to be a bit difficult to persuade people that a North Korean insurance company is secure. But we've advised them to adopt a softly-softly approach, and start dealing first in places like Cuba, Vietnam and Hungary to build up their reputation."

The day when you will be able to insure for fire and theft with the Dear Leader is still a few years off but, according to Mr Bennett, the North Koreans have something of an affinity with the British. "They talk about the Yankee imperialist dogs from time to time, but they don't seem to have any problem with us. Even about the Korean War, they're very understanding - they say that we were just doing our US masters' bidding."

Start your day with The Independent, sign up for daily news emails
PROMOTED VIDEO
Have you tried new the Independent Digital Edition apps?
ebooks
ebooksA special investigation by Andy McSmith
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs General

Tradewind Recruitment: PMLD Teacher

Negotiable: Tradewind Recruitment: PMLD Teacher A specialist primary school i...

Recruitment Genius: Online Media Sales Trainee

£15000 - £30000 per annum: Recruitment Genius: Now our rapidly expanding and A...

Recruitment Genius: Public House Manager / Management Couples

£15000 - £20000 per annum: Recruitment Genius: Are you passionate about great ...

Recruitment Genius: Production Planner

£20000 - £30000 per annum: Recruitment Genius: This fast growing reinforcing s...

Day In a Page

As in 1942, Germany must show restraint over Greece

As in 1942, Germany must show restraint over Greece

Mussolini tried to warn his ally of the danger of bringing the country to its knees. So should we, says Patrick Cockburn
Britain's widening poverty gap should be causing outrage at the start of the election campaign

The short stroll that should be our walk of shame

Courting the global elite has failed to benefit Britain, as the vast disparity in wealth on display in the capital shows
Homeless Veterans appeal: The rise of the working poor: when having a job cannot prevent poverty

Homeless Veterans appeal

The rise of the working poor: when having a job cannot prevent poverty
Prince Charles the saviour of the nation? A new book highlights concerns about how political he will be when he eventually becomes king

Prince Charles the saviour of the nation?

A new book highlights concerns about how political he will be when he eventually becomes king
How books can defeat Isis: Patrick Cockburn was able to update his agenda-setting 'The Rise of Islamic State' while under attack in Baghdad

How books can defeat Isis

Patrick Cockburn was able to update his agenda-setting 'The Rise of Islamic State' while under attack in Baghdad
Judith Hackitt: The myths of elf 'n' safety

Judith Hackitt: The myths of elf 'n' safety

She may be in charge of minimising our risks of injury, but the chair of the Health and Safety Executive still wants children to be able to hurt themselves
The open loathing between Barack Obama and Benjamin Netanyahu just got worse

The open loathing between Obama and Netanyahu just got worse

The Israeli PM's relationship with the Obama has always been chilly, but going over the President's head on Iran will do him no favours, says Rupert Cornwell
French chefs get 'le huff' as nation slips down global cuisine rankings

French chefs get 'le huff' as nation slips down global cuisine rankings

Fury at British best restaurants survey sees French magazine produce a rival list
Star choreographer Matthew Bourne gives young carers a chance to perform at Sadler's Wells

Young carers to make dance debut

What happened when superstar choreographer Matthew Bourne encouraged 27 teenage carers to think about themselves for once?
Design Council's 70th anniversary: Four of the most intriguing prototypes from Ones to Watch

Design Council's 70th anniversary

Four of the most intriguing prototypes from Ones to Watch
Dame Harriet Walter: The actress on learning what it is to age, plastic surgery, and her unease at being honoured by the establishment

Dame Harriet Walter interview

The actress on learning what it is to age, plastic surgery, and her unease at being honoured by the establishment
Art should not be a slave to the ideas driving it

Art should not be a slave to the ideas driving it

Critics of Tom Stoppard's new play seem to agree that cerebral can never trump character, says DJ Taylor
Bill Granger recipes: Our chef's winter salads will make you feel energised through February

Bill Granger's winter salads

Salads aren't just a bit on the side, says our chef - their crunch, colour and natural goodness are perfect for a midwinter pick-me-up
England vs Wales: Cool head George Ford ready to put out dragon fire

George Ford: Cool head ready to put out dragon fire

No 10’s calmness under pressure will be key for England in Cardiff
Michael Calvin: Time for Old Firm to put aside bigotry and forge new links

Michael Calvin's Last Word

Time for Old Firm to put aside bigotry and forge new links