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Many HK firms likely have to pay for protest damage

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Observers say coverage for civil unrest uncommon; insurance companies' earnings may also take a hit

HONG KONG: Businesses in Hong Kong 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 have insurance coverage for riot damage, industry insiders said.

They 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 freedom.

Displaying a banner in support of the police - who protesters have accused 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 is 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 only against events such as fire and natural disasters, such as typhoons.

Coverage for civil unrest, particularly for small and mid-sized companies, is uncommon, industry insiders said.

Hong Kong is a lucrative market for global insurers including American International Group, AXA and Zurich Insurance Group, with the value of premiums as a percentage of gross domestic product at 18.16 per cent, second only to Taiwan in the Asia-Pacific region.

Total insurance premium volume in the territory last year rose 8.3 per cent to US$66 billion (S$90 billion), the quickest growth rate in the advanced Asia-Pacific region that includes Australia, Japan and Singapore, a Swiss Re study showed.

Said an insurance sector lawyer with a global law firm: "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.

"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 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 lawyer declined to be identified due to the sensitivity of the matter.


Damage to subway stations of operator MTR Corp 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." - REUTERS