The decision to pay the insurance money to the 109 companies comes four months after all operations at the Kaesong Industrial Complex came to a screeching halt in early April amid heightened tensions on the Korean Peninsula. Six rounds of talks in July failed to make headway over how to set safeguards to prevent another work stoppage.
Seoul's Ministry of Unification said the 18-person South and North Exchange and Cooperation Promotion Council, which had been checking claims made by the companies, authorized the payment from the inter-Korean insurance policy. The claims have also been checked by the state-run Export-Import Bank of Korea (Eximbank).
"Payments will start from Thursday through Eximbank," said ministry spokesman Kim Hyung-suk. "There are 140 companies eligible to receive insurance payments with 114 having asked for coverage as of Monday."
The official said requests for insurance payments made by five other companies are being checked at present, while 26 companies have not asked for coverage. He said these companies can request payment at a later date.
The spokesman said that companies are being paid in accordance with clauses in the special insurance policy set up in 2004 that authorizes payments if operations are halted due to a breach of contract governing the complex, located just north of the demilitarized zone that separates the two Koreas.
Under the rules, each company can be compensated for up to 90 percent of their investment losses, with a maximum limit set at 7 billion won. The payments do not cover loss of profit due to companies being unable to make products.
Kim said that once payments are made, the South Korean government will acquire subrogation rights to the factories and other assets in the North Korean border town.
"The companies that have taken out the policy should have known in advance the conditions of payment," the official stressed, refuting allegations that some firms were not aware they would effectively lose their ownership rights upon receiving the insurance payments.
He then said that despite Seoul's move to pay the insurance money, it is still committed to the development and growth of the Kaesong complex, which is the last remaining symbol of rapprochement between the two countries.
"We urge the North to accept safeguard measures (proposed by the South) and clearly make known its position on this key issue," the official said.
Meanwhile, he said that it is not right for the government to discuss future "grave" actions it can take if the North fails to heed calls for "final talks" made by Unification Minister Ryoo Kihl-jae on July 28.
The final talks proposal called on the North to pledge that it will not cause a work stoppage at the factory park in the future.
Seoul wants the North to give solid assurances it will not take unilateral action and will accept responsibility for the current situation, while the North has rejected making such guarantees and called for the immediate reopening of the complex. Pyongyang, moreover, claims the South is to blame for the current state of affairs.
Speculations have emerged that once the ownership of assets goes to the government, it will start taking steps that can eventually lead to a more permanent closure of the complex.