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21 June 2023

Hong Kong's Business Insurance Landscape in 2023

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As Hong Kong continues into the second half of 2023, the economy shows promising signs of post-pandemic recovery. Businesses are gradually resuming full-scale operations and eyeing growth opportunities within the city and the broader China region. This revival in commercial activities, however, brings along its share of risks. Companies that may have overlooked essential risk management tools during the past few years are now facing the challenge of managing various exposures as operations resume.

In Hong Kong, like in many parts of the world, Business Insurance is not a uniform solution to risk. While the HKSAR mandates certain coverage products such as Employees’ Compensation Insurance, the majority of corporate insurance solutions remain optional for many industry sectors. Business insurance is a critical component in a company's risk management strategy and the choices a company makes are largely dependent on its unique needs.

Let's dive into some of the business insurance products available in Hong Kong that companies should consider incorporating into their risk management tool-set for the year ahead.

Employee Compensation Insurance

Employee's Compensation Insurance

In Hong Kong, the law mandates that every employer, regardless of the nature of the business, must have an Employee Compensation (EC) Insurance policy. This policy covers the liability of an employee getting injured while at work. The EC policy is applicable to both full-time and part-time employees, irrespective of their working hours or job type.

In the unfortunate event of an employee suffering an accident, injury, or developing an occupational disease during their work, the insurance can provide weekly payments in lieu of the employee's wage, compensation for both past and future economic losses, reimbursement of medical expenses, and even death benefits to the worker’s dependents. The specifics of the Employees Compensation Insurance coverage can vary depending on the insurance company chosen. However, it is crucial to note that this type of insurance plan is mandatory for the coverage of all workers in Hong Kong.

Professional Indemnity Insurance

Professional Indemnity Insurance

In the complex world of professional services, businesses are often exposed to risks that go beyond the physical realm. These risks, often associated with the provision of advice or services, can lead to significant financial losses if a business is found to be negligent. This is where Professional Indemnity and Liability Insurance comes into play.

Professional Indemnity and Liability Insurance, also known as Errors and Omissions Insurance, is a specialized type of business insurance. It is designed to protect professionals in advice-giving service industries against the full costs of defense in the event of a negligence claim regarding their services.

This type of insurance is particularly relevant for professions such as lawyers, insurance brokers, accountants, educational professionals, financial services professionals, construction professionals, media, telecommunications and technology professionals, management consultants, and medical professionals. These professions often involve providing advice or services that, if deemed negligent, could result in significant financial losses for their clients.

Professional Indemnity and Liability Insurance offers a broad range of coverage options tailored to the specific needs of the business. Coverage can range from US$ 500,000 to US$ 15,000,000 for select industries, providing substantial protection against potential claims.

The coverage provided under a Professional Indemnity and Liability Insurance policy can include protection against a broad definition of “Claims”, continuity cover for existing policyholders, and the choice of worldwide coverage for multiple locations. It also offers superior claims handling, ensuring that businesses have the support they need in the event of a claim.

Cyber Risks Insurance

Cyber Risks Insurance

The digital revolution has transformed the way businesses operate, offering unprecedented opportunities for growth and innovation. However, this digital shift has also introduced a new set of challenges and risks. As businesses in Hong Kong and around the world become increasingly reliant on digital technologies, they also become more vulnerable to cyber threats. This is where Cyber Risks Insurance comes into play.

Cyber Risks Insurance is a specialized insurance product designed to help businesses manage and mitigate the risks associated with digital threats. These threats can range from data breaches and network intrusions to Distributed Denial of Service (DDOS) attacks and state-sponsored cyber espionage.

In an era where digital risks are evolving at an alarming rate, traditional business insurance products may not offer adequate protection. Cyber Risks Insurance fills this gap, providing businesses with a safety net against the unique challenges posed by the digital landscape.

Cyber Risks Insurance offers a broad range of coverage tailored to the specific needs of the business. This can include protection against E-Business Interruption, which covers the loss of income due to a cyber incident that disrupts business operations. It can also cover E-Vandalism Losses, providing compensation for losses resulting from malicious digital attacks that damage a company's online presence.

Moreover, Cyber Risks Insurance can cover E-Threat Losses, offering protection against losses incurred due to digital threats such as ransomware or phishing attacks. It can also cover Privacy Notification Expenses, which can be significant in the event of a data breach that compromises customer information.

Key Person Business Insurance

Key Man Insurance

In every organization, there are certain individuals whose skills, knowledge, or leadership are critical to the company's success. These individuals, often referred to as "key persons," can include C-Level Executives, essential Departmental Directors, Regional Managers, Partners in a Firm, Project Leads, or anyone who possesses vital knowledge for an organization. The sudden loss of such a key person, whether through illness, disability, or death, can have a significant impact on a company's operations and financial health. This is where Key Man Insurance comes into play.

Key Man Insurance, owned by a company or business, is designed to compensate the organization against losses resulting from the loss of a key income-generating individual. It helps to ensure continuity of production should a vital staff member become incapacitated or die during the period of their employment with a company.

It's important to note that Key Man Insurance does not provide an indemnity, but instead compensates an organization for the loss of a key staff member with a fixed settlement as specified in the policy contract. The coverage does not extend past the period of employment of the individual being covered. In other words, if the key person leaves the company, the policy will lapse.

While Key Man Insurance provides valuable protection for businesses, it's important to note that it does not cover all risks associated with the loss of a key person. For instance, it does not cover the emotional impact on the team or the potential loss of clients or business partners who had a personal relationship with the key person. It is also not designed to cover risks that are covered under a general Public Liability insurance policy or an Employee Compensation insurance plan.

Hong Kong Business Insurance for your Company

These are just some of the many possible business insurance products available to companies and organizations in Hong Kong. With the introduction of tools like ChatGTP and the expansion of Artificial Intelligence over the last 6 months, the local business landscape is poised to shift dramatically in the coming year as technology provides further opportunities for growth.

CCW Global has been assisting companies of all sizes in protecting their business interests. With our team of expert Insurance Brokers we are able to help key stakeholders understand where the gaps are in existing coverage solutions, while benchmarking alternative products that may be a better fit for your organization. We work to ensure that your company is paying only for the coverage it needs, and that you understand how the insurance you purchase is able to protect your interests.

Ask CCW – We’re Simplifying Your Insurance.

About Author

Michael Lamb is an insurance industry professional with many years of experience within the Hong Kong Insurance market. Focusing on APAC coverage issues, Michael is able to provide extensive analysis and insight to a range of pressing topics. Previously, Michael provided insurance broker Globalsurance.com with their most highly valued articles and was a key influence in the development of all the content on Pacificprime.com, Michael has a passion for insurance matched by few others in the region.

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