Kuala lumpur: Global credit rating agency, AM Best, anticipates that a significant portion of the losses from the recent Hong Kong apartment fire will impact reinsurers, potentially halting the downward pressure on Hong Kong property reinsurance rates despite a globally softening market.
According to BERNAMA News Agency, AM Best’s new commentary titled ‘Hong Kong Fire Expected to be Credit Negative for (Re)Insurers’ highlights that residential property all-risk policies have been traditionally viewed as low-severity exposures by Hong Kong insurers. However, the fire in the Tai Po high-rise reveals the potential scale of risk accumulation within densely populated urban condominiums.
AM Best senior director and head of analytics, Christie Lee, noted that loss-impacted proportional treaties might experience commission reductions in the coming years as a form of recompense. She also mentioned that stricter underwriting standards, including unbundled coverages, more exclusions, and tighter exposure controls, are anticipated.
The agency’s commentary further outlines that losses are expected to be considerable across multiple insurance lines, including property, engineering, public liability, third-party liability, employee compensation, personal accident, motor, and life insurance. Property losses are predicted to dominate general insurance claims, highlighting significant protection gaps in public liability, third-party liability, and professional indemnity coverage.
Primary insurers often depend on a combination of facultative, proportional, and non-proportional reinsurance programs, suggesting that reinsurers will likely bear a substantial portion of the gross incurred loss. With the January 1 renewal season approaching, AM Best suggests the event might lead to premium increases and more stringent treaty terms.
The fire at Wang Fuk Court contributes to Hong Kong’s challenging 2025, marked by record-breaking August rainfall and a series of Black Rainstorms. Preliminary estimates suggest the gross loss could reach US$200 million or more, nearly half the scale of 2018’s Typhoon Mangkhut, which caused approximately US$400 million in damage, as reported by the Hong Kong Federation of Insurers.