Owners of old buildings struggle to get insurance

PUBLISHED : Wednesday, 03 November, 2010, 12:00am
UPDATED : Wednesday, 03 November, 2010, 12:00am

A law requiring buildings to be covered by third-party risk insurance takes effect in two months, but owners of about 350 old blocks are struggling to find an insurer.

The law, passed in 2007, also does not cover 7,000 old and unmanaged buildings because they do not have an owners' corporation.

The approaching January 1 deadline has owners without insurance nervous about the possibility of an accident resulting in a claim and the prospect of a fine of up to HK$50,000 for non-compliance.

There are about 39,000 private residential blocks in the city, of which about 16,000 have an owners' corporation. More than 15,500 buildings with an owners' corporation, or about 95 per cent, have bought the insurance.

Among those which have not bought it, 30 per cent are under construction, and 20 per cent involve discussions with insurance companies.

Director of Home Affairs Pamela Tan Kam Mi-wah said the government would refer the 350 old buildings to the Hong Kong Federation of Insurers, to sort out the issues.

Some private properties, even though they lack an owners' corporation, are covered by the insurance. But 7,000 buildings without an owners' corporation, a management firm or a residents' group are not subject to the law, although they are among the buildings that need insurance most.

Even where there is a corporation, many applications have been turned down by insurers because the buildings are too old and thus more prone to accidents.

An application for an old tenement in Sham Shui Po was rejected eight times by different firms.

The Building Management (Third Party Risks Insurance) Regulation, passed by the Legislative Council in April 2007, says that if a corporation fails to buy third-party insurance for the common parts of a building, 'every member of the management committee shall be guilty of a contravention and liable on conviction to a fine of HK$50,000'.

One member of the Sham Shui Po building's corporation said: 'There are many owners in the building, why should a few of us be responsible for the fine.

'I won't be able to shoulder it. I will give up my position if we can't be covered by insurance,' she said. 'We don't get paid to help manage the building, why should we carry the risk of being fined?'

Tan said the government would be flexible and give owners a grace period if they could prove they made an effort to buy the insurance, including 'zealous efforts to carry out maintenance works to facilitate the buying process'.

More than 30 insurance companies were authorised to issue policies for third-party risk.

Peter Tam Chung-ho, chief executive of the Federation of Insurers, said premiums would be kept low because of ample competition.

Under cover

The proportion of buildings with an owners' corporation now covered by third-party risk insurance: 95%