The incident will trigger multiple coverage types, including property, public liability, employee compensation, group personal accident and numerous home contents claims. It remains too early to quantify total insured losses, insurers and reinsurers to bear most construction-related costs.
China Taiping Insurance (Hong Kong) has coverage exposure of more than $200 million to the Wang Fuk Court apartment complex, and to the contractor of renovation work, publicly available owners’ meeting minutes and a project-briefing document showed.
The deadly fire that ripped through seven high-rise towers in Hong Kong is expected to result in a surge in near-term claims among insurers, and hit earnings of the complex’s main underwriter, an affiliate of China Taiping Insurance Holdings, an analyst at Fitch Ratings said on Thursday.
China Taiping Insurance (Hong Kong) has coverage exposure of more than $200 million to the Wang Fuk Court apartment complex, and to the contractor of renovation work, publicly available owners’ meeting minutes and a project-briefing document showed.
Fitch Ratings expected the Wang Fuk Court fire in Hong Kong to result in a surge in near-term claims, but these are unlikely to affect the rating of China Taiping Insurance Group Ltd. whose Hong Kong-based subsidiary underwrites the complex’s property and liability policies. Strong state-linked support, diversified operations and solid capital alongside extensive reinsurance underpin our view that net losses will remain within rating sensitivities.
The fire, which claimed 159 lives according to the latest official figures, resulted in major property damage across seven of the complex’s eight blocks, including to common areas.
The incident will trigger multiple coverage types, including property, public liability, employee compensation, group personal accident and numerous home contents claims. It remains too early to quantify total insured losses, but we expect insurers and reinsurers to bear most construction-related costs.
The fire will impact affected insurers’ earnings over the next year, with increased claims and cash outflows for non-life insurers and reinsurers. Fitch believes the tragedy is likely to tighten market conditions, with insurers raising premiums, deductibles and exclusions for high‑rise renovations and higher‑risk locations.
Some may also reduce or withdraw underwriting capacity. The impact on credit profiles should be limited, due to reinsurance protection, but the industry is likely to face tighter reinsurance pricing and stricter coverage limits, which could lift operating expenses for primary insurers through 2026-2027. Industry liquidity is supported by short‑tail claims that typically settle within one to two years and asset portfolios that predominantly comprise cash, deposits and bonds.
“We believe insurers will tighten project screening, mandate on-site monitoring during works and raise reserves to account for uncertainty in risk. This incident will likely further shift the industry beyond pure risk transfer to proactive risk mitigation capabilities and stronger operational risk governance to limit future losses and stabilise premiums. We also expect insurers to increase risk diversification across business lines, counterparties and geographies,” said Fitch.
The city’s deadliest fire in decades killed at least 159 people.
China Taiping Insurance (Hong Kong) is expected to be hit by a “temporary uptick” in its combined ratio, Fitch credit ratings agency analyst Mengyuan Wang said in a note. The ratio is a key performance gauge for property and casualty insurance underwriting profitability.
It is also expected to see “modest capital erosion,” it added, but that’s unlikely to affect Taiping’s credit rating, Ms. Mengyuan said.
A spokesperson for the Chinese insurance group declined to comment when contacted by Reuters.
The insurer told Reuters on Tuesday it completed the first batch of nine home insurance claims from Wang Fuk Court residents, paying a total of HK$5.37 million ($689,983) in compensation.
Reinsurance and potential support from the Chinese government should mitigate the impact, Ms. Mengyuan added.
However, the rating agency warned, with loss development still unfolding, higher-than-expected third-party liability claims and slower recoveries could heighten earnings volatility.
By Thursday’s market close, Hong Kong-listed shares of state-owned China Taiping Insurance had dropped 4.2% since the outbreak of the fire.
Rising premiums and higher expenses
The tragedy is likely to tighten market conditions across the board, according to Fitch, with insurers raising premiums, deductibles and exclusions for high‑rise renovations and higher‑risk locations.
Some may also reduce or withdraw underwriting capacity, it added.
The industry is also likely to face tighter reinsurance pricing and stricter coverage limits, which could lift operating expenses for primary insurers through 2026 to 2027, Ms. Mengyuan added.