Hong Kong protests drive insurance review

Unexpected protests in Hong Kong last year caused an immediate slowdown for business, mainly in retail and tourism, but also had a knock-on effect with companies re-evaluating their range of insurance policies.

“Companies in the immediate vicinity of Hong Kong will want to look at a range of insurance options such as political risk insurance, credit insurance, trade disruption and supply chain insurance along with terrorism and/or political violence insurance,” Paul Wilkins, Chairman & CEO, Greater China Region at Marsh, says. “Occupational and non-occupational coverage for employees should also be considered. 

“Demonstrations anywhere in the world generally hit the retail sector first. “Restriction of access from road blockages and civil commotion can cause temporary closure for businesses, and consequently, a loss of revenue.

“Affected businesses however, would have limited losses as a whole, due to the fact that retail businesses generally have a well-diversified number of sites.

“The Hong Kong protest that happened last year were peaceful, there was very minimum property damage from the business side, however, if future protests escalate, it may jeopardize the safety and security of people, assets, and supply chains. It may damage property, cause business interruption or personal injuries.”

The protests will of course ignite a desire for businesses in Hong Kong to investigate comprehensive insurance policies, such as strike, riot, civil commotion, along with reviewing their business continuity management and crisis management strategies.

“It’s been more than 12 years since the aftermath of SARS and two months since the central movement protests ceased,” Wilkins says. “Businesses in Hong Kong would already possess some understanding on how these events impact their company.

“Business continuity management and crisis management are crucial elements for all companies, with the primary objective of any program is to have the shortest recovery time possible to stabilize and protect life, property, the environment, reputation, economic viability, brand identity, and consumer trust.”

Uncertainty in the domestic Hong Kong market will result in businesses reviewing their standard operations and distribution channels in order to cope with any future unexpected disruptions.

That’s the view of Winnie Wong, CEO of Aon Risk Solutions, Hong Kong, after the upheaval of the pro-democracy demonstrations late last year.

“Companies should focus on enhancing the overall resiliency level in their businesses and operations, as no one can predict with certainty how and when the next demonstration will occur,” Wong says.

“For most businesses, improving office mobility and adopting remote working solutions are a good start. It is, however, more challenging for retailers, though some may consider diversifying the distribution channels to online shops as part of their business strategy. Business continuity managers should also stress-test their contingency arrangements to identify any shortcoming.”

Tourism and retail make up to 10 per cent of Hong Kong’s gross domestic product, and that there is no doubt that both took a hit during the protests. Domestic disturbance can have a lasting impact upon tourism and it make take some time for visitors to re-book holidays.

If more protests were to escalate, business confidence would dive and investors might look elsewhere in Asia for opportunities.

“Future protests could escalate to such an extent that we start to see attacks on property which causes direct physical loss and/or damage and in turn forces businesses to shut down operations,” Wong says.

“Alternatively future protests could be of such a scale that they prevent access to businesses in the affected area.  Businesses would be forced to close so long as access is denied.

“Finally, as we saw with the protests at the end of 2014, the simple fact that protests are occurring in close proximity to a business can deter customers. A business should always consider the worst case scenario when planning suitable risk management and/or buying the insurance.”

Hong Kong is still a major financial centre and an active trading hub for Greater China and North Asia, thereby countries will be watching closely in 2015 to see what happens in regards to domestic protests.

While the rest of Asia is probably more concerned with the performance of China’s economy, Hong Kong’s economic performance still has significance on the world stage.

“The stability of political environment in Hong Kong is one of the top risk concerns for most of the companies here,” Wilkins says. “In addition, the stability of labour market and human capital resource are also key strategic risk concerns. 

“Hong Kong has long been considered as an environment with good infrastructure, government policy, stable social environment for business. With China’s growing economy as the backbone, Hong Kong has uniquely positioned itself to be the place where the West meets the East, a place where strategic risk issues are aligned.

“The challenge now for Hong Kong is how to continue to maintain that competitive edge with the slowing down of China, and social anxiety with the uncertainty of its own local economy and administration.”