With the protests in Hong Kong taking a violent turn in the past weeks, many businesses are likely to bear the brunt of the financial losses due to not having insurance that covers riot damage.
Businesses of all sizes sustained various damage, such as broken windows, graffiti, and fires as the protests raged on against what protesters say is Beijing’s encroachment on Hong Kong’s democratic liberties, a Reuters report said.
The report, citing industry insiders, said that insurance covering damage caused by civil unrest is uncommon, especially for small and medium enterprises. This is despite the presence of global insurers such as AIG, AXA, and Zurich and high insurance penetration in Hong Kong. In fact, it ranks second in Asia in insurance penetration at 18.16%, just behind Taiwan.
According to industry experts, insurers in Hong Kong should expect a spike in demand for insurance that includes cover for riot/civil unrest. However, profitability may also take a blow due to event cancellations, weaker demand for travel insurance, and a downturn in Hong Kong’s economy.
“Overall financial damage from these events will be quite significant and neither insurers nor most of the businesses would have prepared for something like this,” an insurance sector lawyer at a global law firm was quoted as saying by Reuters.
“So you will see a sharp rise in litigation around what’s covered and what’s not, as well as pressure on earnings of insurance companies because of a surge in claim settlements and a drop in premium income.”
Due to the ongoing nature of the protests, the financial impact to insurers has yet to be determined, but experts have estimated liabilities at running into the millions of dollars.
Meanwhile a non-life insurance broker said that the past few years have been very rough for the Hong Kong insurance sector.
“Hong Kong property insurers have been making a profit for 20 years, but following two super typhoons in the past two years, they lost all 20 years’ worth of profit,” the broker told Reuters.
“That’s why in 2019 they have been extra prudent in covering property. Luckily there’s been no big typhoon this year, but the unlucky thing is there have been riots.”
