Fitch: The compensation claims from the Tai Po fire are expected to have no impact on China Taiping Group's rating; expects future insurance companies to tighten requirements

The property and liability insurance policy for Tai Po Hong Fu Court is underwritten by the Hong Kong subsidiary of CHINA TAIPING Insurance Group. Fitch Ratings expects that the incident will lead to a significant increase in insurance claims in the short term, but it is unlikely to affect the rating of CHINA TAIPING Insurance Group, as the group has strong national backing, diversified business, robust capital, and a series of reinsurance arrangements that will keep net losses within the sensitivity range of the rating.

The agency believes that the fire will impact the profitability of affected insurance companies in the coming year, with increased claims and cash outflows for non-life insurance companies and reinsurers. This tragedy may also tighten market conditions, leading insurance companies to raise premiums, deductibles, and exclusions for high-rise building renovations and high-risk locations. Some companies may also reduce or withdraw their underwriting capacity.

Due to reinsurance protection, the impact on credit quality should be limited, but the industry may face stricter reinsurance pricing and tighter underwriting limits, which could drive up operating expenses for direct insurers between 2026 and 2027. Industry liquidity is supported by the completion of short-term claims and an asset portfolio primarily composed of cash, deposits, and bonds.

Fitch also believes that insurance companies will strengthen project screening, require on-site inspections during construction, and increase reserves to address the uncertainty of risks. This incident may further drive the industry from simple risk transfer to proactive risk mitigation and stronger operational risk governance to limit future losses and stabilize premiums. Fitch also expects insurance companies to enhance risk diversification across business lines, counterparties, and regions