Comprehensive Guide to Protecting Hong Kong SMEs from Fire and Other Risks with Insurance
- EverBright Actuarial
- 15 hours ago
- 7 min read
In Hong Kong, SMEs face a wide range of commercial and industrial risks and must prioritise proper insurance arrangements. According to the Hong Kong Fire Services Department, there were 1,138 commercial and industrial fire incidents in the first 10 months of 2025 alone — an 11% increase compared to the same period last year. In addition, total claims for commercial flooding caused by typhoons and black rainstorms over the past three years have reached HK$3.8 billion. These figures clearly highlight the critical importance of risk management.
The impact of a single fire on an SME should never be underestimated. Surveys show that the average downtime after a fire is 13 to 22 months, during which monthly fixed expenses (rent, salaries, bank interest, etc.) range from HK$500,000 to HK$2 million. Without adequate insurance preparation, businesses can easily face cash flow collapse. Proper insurance products are therefore essential — especially fire insurance and business interruption insurance. In reality, only 27% of SMEs in Hong Kong have taken out business interruption cover, yet 78% of business owners say their biggest fear is having no income during closure.
For different industries, insurers now offer highly customised policies to address specific risks. For example, restaurants can opt for coverage against grease fires, while logistics companies should focus on loss during goods transit. Market data shows that annual premiums for restaurants typically range from HK$6,800 to HK$14,000, while factories and warehouses pay significantly more — between HK$18,000 and HK$48,000.
I. The Five Major Risks Most Commonly Faced by Hong Kong SMEs
Fire – 42% caused by electrical faults, 28% by renovation work or open flames
Typhoon and Black Rain Flooding – Claims in Kwun Tong, Kwai Chung, and Tsuen Wan industrial areas surged 180% in the past three years
Explosion and Pipe Burst
Theft and Malicious Damage – Over 60% of sites are looted (“cleaned out”) within 48 hours after a fire
Business Interruption — the real killer – 78% of owners fear having no revenue during closure
II. The Most Important Commercial Insurance Products in the Hong Kong Market in 2025 That SMEs Must Consider
Fire & Extra Perils / Commercial All Risks Insurance (the essential foundation)
Typical sum insured for 500–1,500 sq ft shops: HK$6–12 million, annual premium approx. HK$6,800–14,000
Factories/warehouses: HK$15–45 million, annual premium HK$18,000–48,000
Restaurants pay 50–100% higher premiums but it is absolutely worth it
Real case (March 2025, Tai Po Industrial Estate plastics factory fire): Sum insured HK$38 million → received HK$12 million advance within 60 days to rent a new factory
Business Interruption Insurance — the most under-purchased yet most lifesaving policy in Hong Kong
Only 27% of SMEs have it, yet 78% of owners worry most about zero income during closure
Monthly gross profit compensation: HK$80,000–800,000, up to 36 months
Real case: 800 sq ft Tsim Sha Tsui cha chaan teng closed for 16 months after fire → received HK$480,000 per month, total HK$7.7 million, reopened in original location with even better business
Other Important Additional Covers
(1) Industry-Specific Customised Insurance — the biggest trend in 2025 The Hong Kong insurance market is extremely mature. Major insurers (AIG, Zurich, MSIG, Chubb, QBE, AXA, etc.) and professional brokers conduct on-site inspections, review fire safety reports, building plans, and past claims records to tailor policies for you — often at lower premiums than standard packages.
Industry | Common Specific Risks | Recommended Add-ons |
Restaurants / Cha Chaan Teng | Grease fires, freezer breakdown, food spoilage | Food spoilage cover, enhanced grease fire protection, refrigeration breakdown |
Retail / Garment / Toy Wholesale | Massive seasonal stock increase (Christmas & CNY), warehouse flooding | Seasonal increase 50–100%, flooding with zero deductible |
Manufacturing / Hardware / Plastics | Sudden machinery failure, mould loss, explosion | Machinery breakdown, mould itemised full-value cover |
Logistics / Warehouses | Goods damaged in transit, container fires | Inland transit, warehouse-to-warehouse cover |
Beauty / Medical Clinics | Laser equipment damage, claims after fire-related medical incidents | High-value medical equipment, professional indemnity add-on |
Construction / Renovation | Site fires, third-party injury/death, temporary structures | Contractors All Risks (CAR), temporary site fire cover |
(2) Directors & Officers Liability Insurance (D&O) — the personal life jacket for directors After a fire, the second wave of attacks often targets directors personally. Between 2024–2025, at least 11 cases were filed by shareholders claiming personal liability against directors due to fire/flood losses, with claims ranging from HK$8 million to HK$42 million.
Common scenarios that trigger claims (real cases):
Shareholders/Investors: “You knew the building and wiring were old but didn’t replace them — this fire caused tens of millions in loss. That’s negligence!”
Creditors/Banks: “The company is bankrupt after the fire because you didn’t buy enough insurance — directors are personally liable!”
Minority shareholders: “You didn’t mandate business interruption cover — 18 months of no cash flow!”
Staff collective action: “No severance after the fire — directors must pay personally!”
Investigations by Buildings Dept, Fire Services, Labour Dept into directors’ safety responsibilities
D&O covers 100% of:
Legal defence costs (easily millions)
Settlement or judgment amounts (one case reached HK$28 million)
Costs of ICAC/police interviews
2025 SME reference:
Sum insured: HK$10–50 million (large firms HK$100 million+)
Annual premium: from HK$18,000 (clean record), HK$50,000–150,000 for higher-risk or prior claims
Real case (2024 Kwun Tong industrial building fire): 3 directors sued for HK$18 million — entire amount paid by D&O policy, directors paid zero out of pocket
III. The 10 Industry-Specific Solutions Hong Kong Bosses Care About Most in 2025–2026
Industry | What HK bosses fear most | Must-add covers (2025 latest) |
Restaurants / Cha Chaan Teng / Lounges | Grease fires, freezer failure, food spoilage | Enhanced grease fire, refrigeration breakdown, food spoilage (paid in 3–7 days) |
Retail / Garment / Toy Wholesale | 3–5× stock surge before Christmas & CNY | 100% seasonal increase, flooding zero deductible |
Mini-storage / Subdivided units | New fire regulations made them ultra-high-risk | Special underwriting + sprinkler discount + lithium battery add-on |
Manufacturing / Hardware / Plastics | Moulds worth millions, machine downtime | Itemised full-value mould cover, machinery breakdown |
Logistics / Container warehouses | Goods lost on road or at terminal | Warehouse-to-warehouse, container liability, inland transit |
Beauty / Medical Aesthetic Clinics | Laser machines HK$2–8 million each | High-value equipment, professional indemnity |
Construction / Renovation sites | Site fire, third-party injury, temporary structure collapse | Contractors All Risks (CAR), third-party liability ≥HK$100 million |
Jewellery / Watches / Valuables | Cash + diamonds + luxury watches stolen | Valuables cover, cash in safe cover |
Tech / Startups / SOHO | Server & cloud data loss | Electronic equipment, cyber risk, home-office add-on |
Cross-border e-commerce (HK + Mainland warehouses) | Goods lost in Shenzhen warehouse or during transport | Mainland warehouse extension, international transit |
IV. After a Disaster — How Much Money Will the Insurer Pay and When?
Timeline | What you receive | Real-life purpose for HK bosses | Typical SME payout range (2025) |
7–14 days | Advance / Interim payment | Immediate cash for rent, salaries, temporary premises | HK$2–8 million |
30–90 days | Building, machinery, stock reinstatement (staged) | Capital to restart operations | HK$5–30 million |
From month 2 | Monthly gross profit (70% advance) | Keep paying rent, staff, bank loans | HK$80,000–800,000/month |
Anytime with receipts | Increased cost of working (temp premises, overtime, ads) | All extra revival costs reimbursed | HK$0.5–5 million |
Throughout | Professional fees (accountants, smoke removal, surveyors, lawyers) | All paid by insurer | HK$0.3–2 million |
When sued | Third-party liability + D&O | Company and directors personally protected | HK$10–100 million |
V. Most Common and Costly Mistakes Hong Kong SMEs Make When Buying Insurance
Many bosses think “I’ve bought insurance, I’m safe” — only to discover too late that they effectively have no cover because of these classic errors. In 2025, over 38% of SME claims were reduced or rejected for the following reasons:
Severe under-insurance — using original purchase cost or book value instead of current replacement cost → triggers Average Clause → e.g., insured for 60% of value → only get 60% payout Real case (Feb 2025 Tsuen Wan factory fire): Actual reinstatement HK$42 million, insured HK$18 million → received only HK$7.7 million, owner personally liable for HK$24 million → bankruptcy
Misrepresentation of business nature — registering factory as “office” or restaurant as “retail” → full policy voided Real case (May 2025 Kwun Tong mini-storage fire): Registered as “document storage” but rented for furniture + chemicals → HK$26 million claim rejected
No or insufficient business interruption cover → property rebuilt but no income for 18–28 months → cash flow death
Thinking the building’s master policy covers everything — it only covers the structure, nothing inside your unit
No D&O → directors personally sued and forced to sell homes
Additional emerging mistakes in 2025
6. Not declaring mini-storage / subdivided units
7. Not declaring illegal structures / mezzanines
8. Not declaring home office or commercial use of residential premises
9. Not declaring lithium battery / EV charging activities
10. Buying online direct insurance with no broker follow-up → lose 30–50% of legitimate claim
Conclusion: The 2025 Iron Rule for Hong Kong SMEs
“Having insurance doesn’t mean you’re protected — buying the wrong insurance is the same as having none.” Any one of the above 10 mistakes is enough to wipe out decades of hard work overnight.
Act today: WhatsApp your licensed insurance broker and ask them to check all 10 points above, especially:
Is my sum insured sufficient? (Best to get a professional valuation)
Have I declared 100% of my business nature?
Do I have enough business interruption + D&O?
What exactly does the building master policy cover?
Because in Hong Kong, the most expensive insurance is always the one you didn’t buy or bought wrongly.
Need a trusted partner to get it right the first time? Everbright Actuarial & Insurance Brokers Limited specialises in serving Hong Kong SMEs and industrial clients for over 20 years. Our in-house actuarial team and senior brokers provide free on-site risk inspections, professional reinstatement valuations, tailor-made industry packages, and post-loss claim advocacy (including appointing public loss adjustors at the insurer’s cost). We compare 25+ leading insurers to secure the most competitive premium and broadest coverage for you — and we stay with you all the way through any claim.
Contact Everbright today for your complimentary full insurance review + 36-month post-loss cash-flow simulation report.
Email: info@ebactuary.com
Website: www.ebactuary.com
Because with the right broker, your insurance doesn’t just sit in a drawer — it becomes the strongest safety net for your business, your staff, and your family.