Taiping Insurance Shares Plunge After Hong Kong Fire Disaster

Shares of China Taiping Insurance Holdings experienced a significant decline of up to 8 percent on Thursday, primarily due to concerns regarding its exposure of over US$200 million related to a devastating fire at the Wang Fuk Court apartment complex in Hong Kong. The incident, which resulted in the tragic loss of at least 55 lives and left nearly 300 people unaccounted for, has raised alarms about the potential financial implications for the insurance sector.

The Wang Fuk Court, located in the northern district of Tai Po, consists of 2,000 apartments spread across eight blocks, housing over 4,600 residents. Following the fire, shares of state-owned China Taiping Insurance closed down 1.92 percent, underperforming the benchmark Hang Seng Index, which gained 0.1 percent. The company’s shares hit their lowest point since October 24, 2023, earlier during the trading session, when they fell by as much as 8.1 percent.

Public meeting minutes from registered owners of Wang Fuk Court revealed that they approved the continuation of insurance coverage with China Taiping Insurance (Hong Kong) for the complex, effective from January 1, 2025, through December 31, 2026. This policy exposes the insurer to liabilities of up to HK$2 billion (approximately US$257 million) for damages to the exterior and communal areas of the building.

Additionally, the Hong Kong unit of China Taiping Insurance provided coverage for an ongoing renovation project managed by Prestige Construction and Engineering Company, which is valid for three years starting in July 2024. This policy covers “all risks” with a total compensation limit of HK$365 million, alongside employee compensation coverage of up to HK$200 million per incident, as detailed in a project-briefing document.

The Hong Kong government has identified Prestige Construction as the registered contractor for the complex. Despite multiple attempts to reach out, the company did not respond to inquiries seeking comments on the situation. China Taiping Insurance Holdings and its Hong Kong unit also did not provide immediate comments when contacted.

According to analysts at Citigroup, the fire may have substantial repercussions for the underwriting results of Hong Kong’s general insurance industry. They noted that in 2023, gross premiums for property insurance in Hong Kong totaled approximately HK$15 billion (around US$1.93 billion), emphasizing the event’s potential financial impact.

In a statement, the Hong Kong Insurance Authority announced that its senior management is leading a task force to collaborate with relevant insurers. The aim is to ensure that adequate resources are deployed to address claims and inquiries arising from the disaster.

Emergency responders reported that the fire was extinguished in four of the seven affected blocks, with the remaining three brought under control more than 24 hours after it broke out. Investigations have suggested that the fire may have been caused by a “grossly negligent” construction firm using unsafe materials, according to police sources.

The unfolding situation at Wang Fuk Court highlights the ongoing challenges faced by Hong Kong’s housing sector, which is grappling with chronic shortages of affordable accommodation amid rising demand. As investigations continue, the ramifications for China Taiping Insurance and the broader insurance landscape remain to be seen.