Hong Kong Fire Puts Insurer on Hook for Record Claims

A catastrophic fire at the Wang Fuk Court housing complex has resulted in at least 156 deaths and is expected to lead to record-breaking insurance claims. The fire, which burned for over 43 hours, may require the complete rebuilding of the complex and is suspected to be connected to ongoing renovations. As a result, the primary underwriter, China Taiping Insurance (Hong Kong) Co. Ltd., faces significant financial exposure. The market reacted swiftly, with shares in China Taiping Insurance Holdings (00966.HK) falling more than 8% on November 27, 2024, the day following the fire's outbreak, as investors grew concerned about the insurer’s substantial role in covering the project. [para. 1][para. 2]

However, industry experts emphasize that the financial impact will be distributed across a network of global reinsurers. Such extensive risk-sharing is standard practice in Hong Kong to prevent a single major disaster from overwhelming an insurer. Regulatory requirements in Hong Kong mandate insurers to secure adequate reinsurance, ensuring that no single company bears disproportionate risk. Insurance executives confirm that China Taiping Hong Kong had properly reinsured its commitments for the Wang Fuk Court project. [para. 3][para. 4][para. 5]

Following the incident, Taiping Hong Kong disclosed it had underwritten multiple policies related to the renovation: Construction All Risks, Employees’ Compensation, Third-Party Liability for the owners’ corporation, as well as Property All Risks, Public Liability, and additional home and domestic-helper insurance for certain residents. [para. 6]

Documentation from the owners’ corporation specifies that Taiping Hong Kong’s “Property Insurance for the Building and Common Areas” provides up to 2 billion Hong Kong dollars (approximately $256 million) in coverage. The public liability policy covers up to 10 million HKD per incident for third-party injury or death, complying with legal requirements, along with an extra 20 million HKD for additional liability. Furthermore, a group personal accident policy grants up to 100,000 HKD per person for death or permanent disability. Actual payouts for property damage are based on the asset inventory at the policy’s inception and the real value of incurred losses, assessed by professional loss adjusters. [para. 7][para. 8][para. 9]

Determining liability and the total claim payout will be a complex and lengthy process. Industry sources note that several parties—main contractors, engineering consultants, owners’ corporation, and subcontractors—could all share responsibility. As such, liability may ultimately be determined by the courts. Coverage for losses may come from multiple policies, including those held by involved companies and individual homeowners’ insurance. [para. 10][para. 11][para. 12]

Taiping Hong Kong has stated that it will manage claims promptly, activating its emergency response system with a commitment to just, rapid, and reasonable payments. Chinese regulators have also intervened, instructing relevant insurers to improve service and streamline the claims process, with China Taiping Group being urged to take a leading role due to its dual function as principal insurer and reinsurer. Despite complexity around liability, initial payouts to victims are unlikely to be delayed, as insurers can first pay claims and later recover costs from parties deemed responsible through subrogation. [para. 13][para. 14][para. 15]

Hong Kong’s insurance framework emphasizes strong reinsurance arrangements, supported by recent regulatory reforms. Only a fraction of the risk is retained directly by the underwriter, with self-retained liability for any single event typically capped at 10% of an insurer’s capital. The risk-based capital (RBC) regime launched in July 2024 further connects insurers’ capital to their risk exposure, creating added protections against catastrophic losses. [para. 16][para. 17][para. 18][para. 19][para. 20]