AM Best: Hong Kong Fire To Hit Reinsurers, Pressure Property Treaty Terms

KUALA LUMPUR, Dec 2 (Bernama) -- Global credit rating agency, AM Best expects a significant share of losses from the deadly Hong Kong apartment fire to flow to reinsurers—a shift that could halt downward pressure on Hong Kong property reinsurance rates despite a globally softening market.

In its new Best’s Commentary, “Hong Kong Fire Expected to be Credit Negative for (Re)Insurers”, the credit rating agency notes that residential property all-risk policies have been viewed as low-severity exposures by Hong Kong insurers. The Tai Po high-rise blaze, however, exposes the scale of risk accumulation in dense urban condominiums.

“Loss-impacted proportional treaties will likely see commission reductions in subsequent years as a form of payback,” said AM Best senior director and head of analytics, Christie Lee in a statement.

She added that stricter underwriting standards—including unbundled coverages, more exclusions and tighter exposure controls—are expected.

In its new Best’s Commentary, “Hong Kong Fire Expected to be Credit Negative for (Re)Insurers”, the credit rating agency notes that residential property all-risk policies have been viewed as low-severity exposures by Hong Kong insurers. The Tai Po high-rise blaze, however, exposes the scale of risk accumulation in dense urban condominiums.

Losses are expected to be substantial across multiple lines—property, engineering, public liability, third-party liability, employee compensation, personal accident, motor and life insurance.

bootstrap slideshow

Property losses are anticipated to dominate general insurance claims, underscoring significant protection gaps in public liability, third-party liability, and professional indemnity coverage.

Primary insurers typically rely on a mix of facultative, proportional and non-proportional reinsurance programmes, meaning reinsurers will likely absorb a material portion of the gross incurred loss. With the Jan 1 renewal season approaching, AM Best said the event may prompt premium increases and tighter treaty terms.

The fire at Wang Fuk Court also adds to Hong Kong’s turbulent 2025, following record-breaking August rainfall and a series of Black Rainstorms. Preliminary estimates of US$200 million or more suggest the gross loss could reach nearly half the scale of 2018’s Typhoon Mangkhut, which caused roughly US$400 million in damage, according to the Hong Kong Federation of Insurers. (US$1=RM4.12)

-- BERNAMA