Hong Kong firms, lacking riot insurance, pick up pieces from protest damage

Best Mart 360 Holdings

21/10/2019 01:43

* Few small, mid-sized HK firms buy insurance for riot
damage
    * Insurers face impact of cancelled events, economic
downturn
    * Liabilities for insurers could run into millions of
dollars
    * Premises vandalised include those of Best Mart, subway
firm MTR 
 

    By Sumeet Chatterjee and Clare Jim
    HONG KONG, Oct 21 (Reuters) - Hong Kong's businesses will
likely foot the bill for vandalism inflicted over the past four
months during the territory's most violent protests in living
memory as few of them bought insurance coverage for riot damage,
industry insiders said.
    Businesses big and small have suffered smashed windows,
graffiti and even fire for their perceived support of mainland
China by activists concerned that the central government in
Beijing is exerting increased control over the special
administrative region at the cost of democratic freedoms.
    Displaying a banner in support of the police - who
protesters have complained of being heavy-handed - was enough to
see a small video game shop in western New Territories
vandalised four times this month.
    "I don't know whether I'll get insurance compensation," said
shop owner K.K. Man. "There's a chance that I won't get
compensation because the damage is due to social unrest... I
don't think riot damage is covered."
    While businesses flood insurers with claims for such damage,
few are likely to be fully compensated as Hong Kong insurance
usually protects against events such as fire and natural
disasters, such as typhoons.
    Coverage for civil unrest, particularly for small and
mid-sized firms, is uncommon, industry insiders said.
    Hong Kong is a lucrative market for global insurers
including American International Group Inc  AIG.N , AXA SA
 AXAF.PA  and Zurich Insurance Group AG  ZURN.S , with the value
of premiums as a percentage of gross domestic product at 18.16%,
second only to Taiwan in the Asia-Pacific region.
    Total insurance premium volume in the territory last year
rose 8.3% to $66 billion, the quickest growth rate in the
advanced Asia-Pacific region that includes Australia, Japan and
Singapore, a Swiss Re study showed.
    Near term, Hong Kong insurers expect a surge in demand for
coverage that includes riot damage, though profit is likely to
suffer from payouts for event cancellations, a drop in demand
for travel insurance and, more generally, economic downturn.    
    "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," said an insurance
sector lawyer with a global law firm.
    "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," the lawyer said.
    The financial impact of the protests could not be determined
with unrest ongoing, but two insurance executives said
liabilities for insurers could run into millions of dollars.
    The executives and the lawyer declined to be identified due
to the sensitivity of the matter.
    
    UNLUCKY
    Anti-government demonstrations have taken place on almost
every weekend since June 9. On Sunday, riot police and
protesters exchanged tear gas and petrol bombs as an illegal
march descended into chaos, with hundreds of shops trashed and
Chinese banks and metro stations targeted.  urn:newsml:reuters.com:*:nL3N275038
    Retailer Best Mart 360 Holdings Ltd  2360.HK  on Wednesday
said as of Oct. 13, 59 of its stores had suffered damage during
protests.
    "The Group is discussing and handling with its insurance
company," it said. "In the event that the insurance company
refuses to compensate or inadequately compensates its claims,
the Group may be required to bear the corresponding economic
losses."
    Best Mart did not identify its insurer or elaborate on why
compensation might be refused. An external spokeswoman for the
retailer declined to comment beyond the statement.
    Damage to subway stations of operator MTR Corp Ltd  0066.HK 
may not be fully covered by its insurance, and its inability to
recover such costs is likely to weaken its credit profile,
credit-rating firm Moody's Investors Service said last week.
    MTR declined to comment.
    "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," said a non-life
insurance broker in Hong Kong.
    "That's why in 2019 they have been extra prudent in covering
property," the broker said. "Luckily there's been no big typhoon
this year, but the unlucky thing is there have been riots."
    ($1 = 7.8428 Hong Kong dollars)

    <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
Resurgent Hong Kong protesters stage huge rally, violence erupts
again     urn:newsml:reuters.com:*:nL3N275038
    ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
 (Reporting by Sumeet Chatterjee, Clare Jim and Felix Tam;
Additional reporting by Donny Kwok; Editing by Christopher
Cushing)
 ((sumeet.chatterjee@thomsonreuters.com; +852-2847 2094;))