Fitch Ratings expects the recent Wang Fuk Court fire in Hong Kong to result in a surge in near-term claims, but says these should be manageable and unlikely to affect the rating of China Taiping Insurance Group Ltd. (TPG, A-/Stable), whose Hong Kong-based subsidiary underwrites the complex’s property and liability policies.
The fire caused major property damage across seven of the complex’s eight blocks, including common areas. According to Fitch, the incident will trigger multiple coverage types, including property, public liability, employee compensation, group personal accident and numerous home-contents claims.
Although it is too early to quantify insured losses, Fitch expects insurers and reinsurers to bear most construction-related costs.
The ratings agency said net losses will remain within TPG’s rating sensitivities due to its strong state-linked support, diversified operations and solid capital alongside extensive reinsurance.
Fitch anticipates TPG will limit the net impact by coordinating claims and recoveries across its subsidiaries. The group’s capitalisation is resilient, reflected in a ‘Very Strong’ Fitch Prism model capital score and group solvency ratios well above regulatory requirements.
Fitch expects a temporary uptick in the group’s combined ratio and modest capital erosion, but still within tolerance levels for the rating. Layered reinsurance and potential ultimate parental support from the China government should mitigate the impact. However, as loss development continues, higher-than-expected third-party liability claims and slower recoveries could heighten earnings volatility.
Over the next year, Fitch believes the fire will affect the earnings of impacted insurers, with increased claims and cash outflows hitting non-life insurers and reinsurers.
The ratings agency also expects the event to tighten market conditions, with insurers raising premiums, deductibles and exclusions for high-rise renovations and higher-risk locations. Some may also reduce or withdraw underwriting 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 stricter coverage limits, which could lift operating expenses for primary insurers through 2026-2027. Industry liquidity is supported by short‑tail claims that typically settle within one to two years and asset portfolios that predominantly comprise cash, deposits and bonds.
“We believe insurers will tighten project screening, mandate on-site monitoring during works and raise reserves to account for uncertainty in risk. This incident will likely further shift the industry beyond pure risk transfer to proactive risk mitigation capabilities and stronger operational risk governance to limit future losses and stabilise premiums. We also expect insurers to increase risk diversification across business lines, counterparties and geographies.”
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