Fitch Ratings expects the recent fire at Hong Kong’s Wang Fook Court to lead to a surge in near-term claims, but says these should be manageable and unlikely to affect the ratings of China Taiping Insurance Group Co. Ltd. (TPG, A-/Stable), whose Hong Kong unit underwrites the complex’s property and liability policies.
The fire caused significant property damage to seven of the building’s eight blocks, including common areas. Fitch said the incident would trigger multiple coverage types, including property, public liability, workers’ compensation, group personal accident and numerous household contents claims.
Although it is too early to quantify insured losses, Fitch expects insurers and reinsurers to bear the majority of construction-related costs.
The ratings agency said net losses will remain within TPG’s rating sensitivity range due to TPG’s strong government support, diversified operations, strong capital and extensive reinsurance.
Fitch expects TPG to limit the net impact by coordinating claims and recoveries from its subsidiaries. The group’s capital is resilient, with a Fitch Prism Model capital score of ‘Very Strong’ and group solvency ratios well above regulatory requirements.
Fitch expects the group’s combined ratio to rise temporarily and capital erosion to be modest but within the ratings’ tolerance range. Chinese government tiered reinsurance and potential ultimate parent support should mitigate the impact. However, as losses continue to unfold, higher-than-expected third-party liability claims and slower recovery rates could exacerbate earnings volatility.
Fitch believes that in the coming year, the fires will affect the earnings of affected insurance companies, and increased claims and cash outflows will hit non-life insurance companies and reinsurers.
The rating agency also expects the incident to tighten market conditions, with insurers raising premiums, deductibles and exclusions for high-rise renovations and high-risk areas. Some may also reduce or eliminate coverage capacity.
Fitch said, “The impact on credit profiles should be limited due to reinsurance protection, but the industry is likely to face tighter reinsurance pricing and tighter coverage restrictions, which may increase operating expenses for major insurers in 2026 to 2027. Industry liquidity is supported by short-tail claims that typically resolve within one to two years and an asset mix that mainly consists of cash, deposits and bonds.”
“We believe insurers will step up project screening, mandate on-site monitoring during construction, and increase reserves to deal with risk uncertainty. This event is likely to further shift the industry away from pure risk transfer and towards proactive risk mitigation capabilities and stronger operational risk governance to limit future losses and stabilize premiums. We also expect insurers to increase risk diversification across business lines, counterparties and geographies.”
