Following the devastating four-alarm fire that gutted the under-construction Kimpton Hotel in Hong Kong, a unit of the Ping An insurance group has admitted to its liability as the insurer providing cover for the accident.
Ping An Property & Casualty (P&C) said that with reinsurance arrangements in place, the insurer is liable for 23.06% of the claims made by the owner of the Kimpton Hotel, amounting to a maximum HK$606.94 million. The figure comes from the insurer noting that the property has a total coverage of HK$2.63 billion (US$335.3 million). This overall cost includes the HK$1.82 billion of “contractors’ all risks” insurance and HK$800 million of third-party liability cover.
The confirmed maximum cost of coverage is higher than an estimate from an expert in the insurance industry in Hong Kong legislature, which was already being pegged as the highest in Hong Kong history. Insurance expert Chan Kin-por earlier estimated that the claim for the Kimpton Hotel fire could range from HK$200 million (US$25 million) to as much as HK$500 million (US$64 million).
“The company has attached great importance to the incident and immediately set up a special working group to launch any emergency services and claim follow-ups,” a Ping An spokesperson said in a statement to the SCMP
The spokesperson also said that Ping An P&C has made reinsurance arrangements for the insured building amount, resulting in the insurer covering only a fraction of the colossal cost associated with hotel fire. The 42-storey hotel was already 90% completed when it suffered the blaze, a fact that makes it entitled to a high level of compensation.
“The potential payout, which may be as high as HK$500 million as estimated by insurers, is a huge sum of compensation. Even after reinsurance, the exposure for Ping An will remain high and hence it will be bad news for its share price,” Everbright Securities strategist Kenny Ng Lai-yin said.
Though the costs of the fire are expected to cut into the shares of the Chinese insurance giant, Ng said that its effects will only last a couple of weeks. Ping An’s status as a leading insurance company means that it is well within the norm for it to face huge claims from time to time, although he noted that “it is not that common to have a huge fire at a skyscraper.”
“As long as Ping An has proper risk management in place, there will be no long-term negative impact to the company,” Ng said.
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