Storm and fire losses deepen pressure on Hong Kong P&C earnings

The incident will add to diluted earnings but is unlikely to threaten overall solvency.

Claim losses from Hong Kong’s recent fire at Wang Fuk Court in Tai Po will add pressure to the underwriting results of the property and casualty (P&C) insurance sector, according to S&P Global Ratings.

The sector is already dealing with higher claims this year following Super Typhoon Ragasa and severe black rainstorms.

In a new report, S&P said the fire at Wang Fuk Court in Tai Po will weaken underwriting margins, although the impact remains manageable given insurers’ capital positions. 

Credit analyst Emily Yi said the incident will add to diluted earnings but is unlikely to threaten overall solvency.

China Taiping Insurance (HK) is expected to face the largest share of claims because it provided property damage and third-party liability cover for the building’s renovation. 

However, S&P said most of the losses will be absorbed by reinsurers due to the company’s reinsurance arrangements.

S&P estimates that retained losses from the fire could lift the sector’s net combined ratio by 2 to 3 percentage points to around 97% to 98% in 2025, from 93.2% in 2024. 

The sector is still expected to record underwriting profits, as ratios below 100% indicate positive technical performance.

Reinsurance protections, including treaties and excess-of-loss programs, will help limit the financial impact on primary insurers. 

The sector’s overall reinsurance usage was about 35% in 2024, rising to roughly 60% for property lines. 

S&P noted that many rated insurers also benefit from financial support from parent groups.

The rating agency said insurers are likely to revisit risk retention and pricing in the property insurance market, where premium rates have fallen in recent years due to competition. 

Recent incidents, including a scaffolding fire on an office building in October, have highlighted risks linked to construction materials and practices.

S&P added that primary insurers may also be more cautious in expanding inward reinsurance for property risks, as doing so could increase their exposure to large losses and natural catastrophes.