Hong Kong insurers face profit pressure in aftermath of deadly Tai Po fire

The devastating fire in Tai Po is likely to hurt profitability at Hong Kong’s property insurers and could prompt them to review pricing strategies that have led to lower premiums amid fierce competition, according to S&P Global Ratings.

“Claim losses from last week’s fire at Wang Fuk Court in Tai Po will further erode the sector’s underwriting margins,” said Emily Yi Chang Yoon, credit analyst at S&P, in a report.

The city’s property and casualty insurance companies already faced thinner earnings after several extreme weather events earlier this year, she added.

The fire last week, which killed at least 151 people and affected at least 3,300 residents, could raise the sector’s net combined ratio – a key measure of profitability – to 97 to 98 per cent this year, an increase of 2 to 3 percentage points, the rating agency said.

The metric is calculated by taking net claims and expenses incurred, then dividing by net earned premium. Anything above 100 per cent means insurers are taking a loss on underwriting. In 2024, the ratio for Hong Kong’s property and casualty insurers was 93.2 per cent, according to S&P.

While seven out of the eight towers at Wang Fuk Court were damaged, insured losses would mainly come from the two blocks that suffered the most severe destruction, said S&P. The sum of liable damages for all eight blocks was estimated to be as high as HK$2.6 billion (US$334 million).

But additional claims by the homeowners were expected to add further losses to the broader insurance sector, the rating agency noted.