According to ratings agency AM Best, a material portion of the gross incurred loss, which may exceed $200 million from the deadly Hong Kong apartment (Wang Fuk Court) fire, is expected to be transferred to reinsurers.
This is because primary insurers typically rely on a mix of reinsurance arrangements, including facultative, proportional, and non-proportional treaties, to protect their balance sheets.
With the January 1 reinsurance renewals approaching, Best noted that the process may prompt premium adjustments, while reinsurers could respond by tightening terms and conditions.
According to Best, this is likely to halt the downward pressure on the country’s property reinsurance rates, despite the broader global softening in reinsurance pricing.
Christie Lee, Senior Director, Head of Analytics, AM Best, commented, “Loss-impacted proportional treaties will likely see commission reduction in subsequent years as a form of payback, prompting potential restructuring for improved economic and capital efficiency. The market anticipates stricter underwriting standards ahead, including unbundled coverages, added exclusions, and tighter controls on exposure accumulation.”
The industry insured losses from the fire may approach half the scale of Typhoon Mangkhut’s loss, which totalled about $400 million, according to the Hong Kong Federation of Insurers. Amongst this, property losses are anticipated to dominate general insurance claims, underscoring significant protection gaps in liability, according to AM Best.
The loss from the event is expected to be significant, involving multiple lines of business, including property, engineering, public liability, third-party liability, employee compensation, personal accident, motor and life insurance.
Hong Kong has faced a tumultuous 2025, with this fire marking the end, as it experienced record-breaking rainfall in August after a series of Black Rainstorms.
The Hong Kong apartment complex has 2,000 apartments across eight blocks and houses over 4,600 people.
The exact cause of the incident remains under investigation, but reports suggest the blaze originated on exterior scaffolding and the protective netting surrounding parts of the estate during renovation.
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