Hong Kong Fire Liability Triggers Drop at Taiping Insurance
(Bloomberg) — China Taiping Insurance Holdings Co. Its shares fell on Thursday on concerns about the insurer’s estimated HK$2.6 billion ($334 million) exposure to a Hong Kong housing project at the center of a deadly fire.
The company’s shares fell as much as 8.1% in early trading before paring losses to less than 1% as of 1:58 p.m. in Hong Kong. China Taiping assumed third-party liability and workers’ compensation for mandatory building and window inspection work at Wang Fuk Court in Tai Po.
The HK$316 million construction project, which relies on bamboo scaffolding and protective netting, is under investigation for its role in a fire that broke out 18 hours ago and has yet to be extinguished.
China Taiping’s policy covers the full contract amount and an additional HK$50 million ($6.4 million) for accidents. The insurer is also providing HK$200 million in workers’ compensation for the project.
Separately, China Taiping has a general all-risk property policy covering HK$2 billion. A representative for the company declined to comment.
Philip Mak, president of the Hong Kong Federation of Insurance Professionals, said in a telephone interview that the general property all-risk policy and specific construction coverage were “seriously underinsured” given the scale of work at the nearly 2,000-unit complex.
Reconstruction costs for common areas and elevator steel cables will almost certainly exceed the insured amount, Mak said. Individual owners can claim death and personal injury compensation under the HK$50 million accident portion of the policy, he added, but that amount is “nowhere near enough” given the deaths and hundreds more still unaccounted for.
According to Bloomberg Intelligence analysts Steven Lam and Joyce Ho, China Taiping’s exposure to the complex could be HK$2.6 billion before reinsurance; about 9.3% of this year’s consensus earnings, or 1.5% of shareholder equity as of June, assuming a 50% reinsurance recovery.
–With help from Kelly Li, Felix Tam, Jiyeun Lee and Zhang Dingmin.
(Updated with comments from Bloomberg Intelligence.)
More stories like this available Bloomberg.com
