Hong Kong airport protests highlight ground accumulation exposure for re/insurers: RGL
Protests in Hong Kong have highlighted the potential airport ground accumulation exposures faced by international insurers and reinsurers, according to data from Russell Group Limited (RGL).
The protests, which centre on Chinese government plans - currently on hold - to allow extradition from Hong Kong to mainland China, have prompted major disruption to flights in and out of the financial hub.
RGL found that 69 aircraft valued at $6.1 billion were scheduled to be on the ground at Hong Kong airport on the 16th August 2019, using its ALPS Visualiser service, which quantifies aerospace industry and portfolio peak exposure. The problem is that the annual average for airport ground accumulation at the airport is 68 aircraft of value $6.0 billion.
The risk management firm highlighted other airports that could be caught up in the disruption. For example, the annual average for airport ground accumulation in Taiwan Taoyuan airport on the same day was 39 aircraft scheduled to be on the ground of value $3.2 billion. Singapore had 56 aircraft scheduled to be on the ground of value $4.7 billion.
Taiwan in particular is “another airport serving a hub that has traditionally experienced geopolitical tensions with China”, RGL said, adding “Hong Kong's airport is an important regional trans-shipment centre, passenger hub and gateway for destinations in Mainland China (with 45 destinations) and the rest of Asia. The airport is the world's busiest cargo gateway and one of the world's busiest passenger airports.
“It is also the primary hub for Cathay Pacific, whose chief executive Rupert Hogg quit after the airline became embroiled in the controversy over protests there. Hogg said he was taking responsibility as these had been ‘challenging weeks’ for the airline.”
The risk management firm also referenced the 2014 incident at Tripoli airport, where there were “hundreds of millions of dollars of losses” after 13 aircraft on the ground were bombed by local militia and either damaged or destroyed during the battles.
Suki Basi, RGL CEO, said: "With a build-up of troops, military transports and armoured personnel carriers across the border in Shenzhen, airlines and their insurers will be increasingly mindful of their on the ground assets. Airports around the world are a strategic national asset and therefore often seen as fair game for disruption by protestors and factions seeking to score propaganda points. The risk, however, could be considerable if one side miscalculates."
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