Hong Kong, October 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 vandalized 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, AXA SA and Zurich Insurance Group AG, 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.