Commercial property claims almost never fail because the building was uninsured. They fail because two policies each assumed the other one covered something[9].
The structure is insured by the landlord, the owner of the property, under the deed of mutual covenant or the lease[4]. A fit-out, any change to the property interior by the tenant, is insured by the tenant. Any stock and equipment brought in to the property are the tenant’s. Business interruption is the interruption of the tenant’s business, and is the single most commonly missing insurance cover[10]. Between the two layers are the seams, and claims land in the seams[9].
This guide sets out how commercial building owners and occupiers in Hong Kong should actually arrange who insures what, and the five gaps that produce most of the shortfalls.
Read next
For the wider commercial picture, business insurance in Hong Kong covers the other classes, and employees’ compensation sets out the statutory duty. Our business insurance page sets out what we arrange. If the business also operates a drone, that is a separate policy worth checking, and our full business insurance overview covers where this fits into the wider programme.
In this article
Who Insures What: Property Owners vs Tenants
Read the lease before reading any policy. The lease is the document that allocates the risk;[4] the policies simply give effect to it.
The landlord, or the owners’ corporation, typically insures the structure, the common parts and the fixed services, funded through the management fee[1] or the service charge under the deed of mutual covenant. The building, the lifts and any area outside the property being rented.
The tenant typically insures the fit-out, decorations, they installed, including their own contents and equipment, their stock, their liability to third parties and loss of income[6].
The seam is the fit-out installed by a previous tenant, or by the landlord, which may then be altered. Each party may reasonably believe the fit-out belongs to the other[3]. Establishing that in writing at the start of a lease takes one email[2] and prevents the most common disputed claim in commercial property.
The practical instruction: ask the landlord or managing agent for a copy of the building policy schedule[1]. You are entitled to understand what is already covered,[15] and it is the only way to buy your own cover without either duplicating it or leaving a hole[5].
What a Commercial Building Insurance Hong Kong Policy Covers
A commercial building insurance policy is usually built from a familiar set of perils,[8] with the wording varying more than buyers realise.
| Section | What it covers | Usually optional? |
|---|---|---|
| Fire and perils | Fire, lightning, explosion, aircraft impact | No, this is the core |
| Typhoon and flood | Windstorm and water damage from weather | Often included in Hong Kong, but check |
| Water damage | Burst pipes, sprinkler leakage, escape of water | Frequently an extension |
| Glass | Shopfronts and internal glazing (glass and mirrors etc.) | Usually an extension |
| Public Liability | Injury or damage to third parties at the premises | Separate |
| Business Interruption | Loss of gross profit while you cannot trade | Separate |
| Reinstatement basis | The Rebuilding Cost, as new rather than at a depreciated value | Check which basis applies |
Standard sections in a Hong Kong commercial property policy. Some are automatic, several are optional, and the optional ones are where the gaps appear[7].
Two of those rows deserve attention. Water damage is the most frequent commercial property claim in Hong Kong by number,[7] driven by ageing plumbing and sprinkler systems in older buildings, and may be an extension rather than a core peril. Reinstatement basis determines whether you receive the cost of rebuilding or the depreciated value of what was lost,[7] which on a ten-year-old fit-out is a very large difference.
Business Interruption and Liability Insurance: The Missing Cover
The Property insurance policy repairs the premises[10]. It does nothing about the fact that you could not trade for four months[11] while it was being repaired.
Business interruption insurance covers the gross profit of your business, that was lost during the period the business is unable to operate,[10] plus the Increased Costs Of Working — temporary premises, overtime, whatever it takes to keep the company running. It is the difference between a fire being a disruption and a fire ending the business[11].
Two settings matter more than the sum insured.
The indemnity period. How long the policy will continue paying. Twelve months sounds generous and is frequently too short[16]. If the building premises need structural work, planning consents and a full refit, twenty-four months is often the realistic figure.[16] Business insurance policies may not extend the indemnity period, and a separate Business Interruption policy may be required.
The basis of the sum insured. Gross profit as defined in an insurance policy is not the same as the accountant’s[12] figure, and the difference catches businesses out regularly. This is worth getting right with someone who deals with it often[12].
The premises is repaired either way. Whether the business survives the repair is what business interruption decides, and it is the cover most commonly left off a Hong Kong Business or Property schedule[11].
Five Gaps That Catch People
1No business interruption at all. Can the business afford temporary premises, rearranging deliveries, employees overtime etc.
What needs to be done to keep the business going. Covered above.
2Reinstatement Costs. The cost of any fit-out should be updated annually, to ensure the fit-out is reinstated at todays costs[7].
3Water damage excluded or sub-limited. The most frequent claim type, and frequently an extension nobody bought[16].
4Glass left out. A shopfront is expensive and exposed, and glass is almost always a separate item[16].
5Public Liability. It usually is not part of a Property policy. e.g. A customer injured on your premises is a separate section[6].
A sixth worth mentioning is the statutory matter of [13] Employees’ Compensation. Every employer in Hong Kong must maintain Employees’ Compensation[13] insurance covering liability to employees for injury whilst working, under the Employees’ Compensation Ordinance. It is compulsory, separate from Public Liability,[14] and a commercial property policy does not satisfy it.
Setting the Sum Insured for Property Insurance
Underinsurance is punished proportionally, which is why the number matters more than people assume.
Most commercial property policies contain an average clause. If the sum insured is materially below the true value at risk, a claim — including a partial claim — is reduced in the same proportion. Insuring a fit-out for half its value and the claim is settled at roughly half, even if the loss itself was small. Insure for 50% of the replacement value and an insurer pays the claim at 50% of the claimed amount. i.e. 25%!
Three practical points:
Value the fit-out at replacement cost, including professional fees, demolition and debris removal, and the cost of complying with current building requirements when reinstating. That last item is frequently overlooked and can be significant in an older building.
Revisit it annually. Construction costs increase, and the sum insured at the start of a five-year lease is unlikely to be right in five years later.
Include stock at its realistic peak, not its average. If the stock level held by the company triples before a seasonal peak, insuring the average leaves you underinsured for the period you can least afford it.
What Risk Management and Insurance Cost
Property premiums are rated on the sum insured, the age of the building, the trade being carried on, the fire protection and security in place, and the claims history.
A straightforward office fit-out in a modern building with sprinklers is at the lower end of the range. A restaurant kitchen, a workshop with hot works, or storing flammable stock sits considerably higher, because the underwriting is about the trade rather than the square footage. Business Interruption is priced on the gross profit sum insured and the indemnity period, and extending the indemnity period from 12 months to 24 months is usually a modest addition.
Those are indicative descriptions rather than quotations. Policy and pricing documents are client-confidential and we go through them with you in detail during the advisory process, so you see every option we put in front of you.
How This Plays Out in Practice
The people below are invented. The situations are real — they are the kinds of thing we see every week — but the individuals are not, and we would never tell a client’s story in a way that could identify them.
Insured the fit-out, not the downtime — a small design studio*
*Fictitious persona based on situations we see regularly. We never reveal client information.
A ten-person studio in an older commercial building suffered water damage from a burst pipe on the floor above. The fit-out was properly insured and repaired. The four months during which the team worked from three different serviced offices, the cost of moving computers etc. to the temporary premises, and the projects that slipped as a result, led to company losses. On what was described, Business Interruption at a realistic indemnity period would have been the difference between a difficult quarter and a difficult year.
Two policies, one assumption — a retail tenant*
*Fictitious persona based on situations we see regularly. We never reveal client information.
A shop tenant assumed the landlord’s building policy covered the shopfront glass; the landlord assumed the tenant’s contents policy did. Neither wording actually did, as glass was an optional extension on both. Establishing the allocation in writing at the start of the lease is a ten-minute exercise that would have solved the problem. Our guide to a shop’s own insurance package goes through the glass, stock and liability cover a retail lease usually calls for.
Already properly arranged — a serviced-office occupier*
*Fictitious persona based on situations we see regularly. We never reveal client information.
A consultancy in a managed building asked what commercial property cover it needed. Because the fit-out belonged to the operator, and the contents amounted to laptops, the honest answer was that a property policy added very little. What it did need was public liability, employees’ compensation and professional indemnity. Recommending less of one thing and more of another is sometimes the recommendation.
Frequently Asked Questions
Who is responsible for insuring a commercial building insurance, and who the lease usually places the duty on?
Typically the landlord or the Owners’ Corporation insures the structure and common parts, funded through the management fee or service charge, while the tenant insures the fit-out, contents, stock, liability and its loss of income. The lease is the document that decides it, so it should be read before either policy is bought.
Does the landlord’s policy cover my fit-out?
No. Tenant improvements are the tenant’s responsibility to insure, and the common dispute concerns a fit-out installed by a previous tenant. Each side may believe the responsibility belongs to the other. Establishing the allocation in writing at the start of the lease avoids the most frequent disputed claim in commercial property.
What is business interruption insurance and do I need it?
It covers the gross profit lost while your business cannot trade after an insured event, plus the increased costs of working. It is the most commonly missing cover in Hong Kong and often the difference between a fire being a disruption and being terminal. If your income depends on the business operating, you need it.
How long should the indemnity period be?
Long enough to get fully back to trading, which is usually longer than people assume. Twelve months is the common default and is frequently too short once structural work, consents and a refit are accounted for. Twenty-four months is often more realistic, and the additional premium is usually modest.
What is an average clause?
A provision that reduces a claim proportionally where the sum insured is materially below the true value of the insured risk. Insuring a fit-out for half its true replacement cost and a claim will be settled at roughly half, even if the loss itself was partial. It is why the sum insured deserves proper attention.
Is water damage covered as standard?
Not always, and it is the most frequent commercial property claim in Hong Kong, driven by older buildings, ageing plumbing and sprinkler systems. It is frequently offered as an extension rather than as a core peril, so it is worth confirming rather than assuming.
Does a property policy cover my employees?
No. Employees’ compensation insurance is a separate and a compulsory requirement for every employer in Hong Kong, under the Employees’ Compensation Ordinance. A commercial property policy does not satisfy that obligation.
How You Close the Gaps Between the Two Policies
We are a licensed Hong Kong broker, and on commercial property most of the value is in reading the lease and the owners Building Insurance policy together, before any insurance is placed. That is one conversation and one document request.
Read the lease
We work out from the lease and the deed of mutual covenant what the landlord or the owners’ corporation is already insuring, so you are not paying twice for the structure or the common parts.
Find the seams
We identify the fit-out, glass, stock and liability items each side may be assuming the other covers, and get the boundary confirmed in writing at the start rather than after a claim.
Set the indemnity period
Business Interruption should be on a realistic rebuild-and-refit timeline rather than the standard twelve-month default, and check the gross profit definition against your actual accounts.
Find out which layer is really covering you
Most commercial building insurance has cover differences in it somewhere, and these seams only becomes visible when it’s time to claim. Reading the two policy schedules together takes one meeting and settles it in advance.
Speak with us today
No pushy sales. Just honest advice from a licensed Hong Kong broker.
Phone: +852 3563 9771
Email: [email protected]
Office: Suite 701, Connaught Commercial Building, 185 Wan Chai Rd, Wan Chai, HK
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Our advisers have more than 60 years of combined experience arranging insurance for expatriates and families in Hong Kong. We write these guides from what we see in real cases every week — the policies that work, the gaps that catch people out, and the questions worth asking before you commit.
Sources & references
- Community Legal Information Centre, Duty of the OC to procure third party risks insurance: the legal starting point for anyone occupying a Hong Kong commercial building. Under section 28 of the Building Management Ordinance an owners’ corporation must procure and keep in force third party risks insurance for the common parts, with a minimum insured amount of HK$10 million for an accident involving bodily injury or death. It is the layer a tenant should never duplicate and should always ask to see, because it decides where their own liability cover needs to begin.
- Home Affairs Department, Building Management (Third Party Risks Insurance) Regulation: the Government’s own statement of the regulation behind that duty. It explains that the requirement exists to reduce the risk of large compensation falling on individual owners after an accident in the common parts — lifts, staircases, fire service installations — and to give the public a solvent defendant. That policy purpose is why the cover attaches to the building rather than to any one occupier.
- Home Affairs Department, Building Management Ordinance (Cap. 344): the departmental overview of the Ordinance as a whole, covering how owners’ corporations are formed, what the management structure must do and where the insurance duty sits among its other obligations. Useful for a tenant trying to work out who they are actually dealing with when a managing agent, an OC and a landlord all appear on the same correspondence.
- Building Management Ordinance (Cap. 344): the Ordinance itself, cited so the section 28 duty can be read in its statutory form rather than in summary. Where a lease, a deed of mutual covenant and a building policy disagree about who insures what, this is the text that fixes the floor beneath all three.
- Home Affairs Department, A Guide on Building Management Ordinance (Cap. 344): the Government’s plain-language guide to the same regime. It is the document to hand a client who has been told “the building is insured” and wants to understand precisely what that does and does not mean for the unit they occupy and the fit-out inside it.
- Occupiers Liability Ordinance (Cap. 314): the statutory basis of the duty a business owes to visitors on its premises. It is the reason public liability is a separate section from property damage: the exposure arises from occupation rather than from ownership, so it follows the tenant into the unit regardless of who insured the structure.
- MSIG Hong Kong, Property All Risks insurance: a panel insurer’s commercial property wording, providing cover against loss or damage to commercial or industrial property. Cited for the structure this article describes: a material damage section with named or all-risks perils, a reinstatement basis that decides whether a ten-year-old fit-out is settled at rebuilding cost or depreciated value, and optional extensions where most of the gaps appear.
- MSIG Hong Kong, SME Protection Bundle: the same insurer’s packaged product for smaller occupiers, which bundles public liability of up to HK$10 million per event with cover for fixed computers, systems and data. It is a useful benchmark for the liability limit a Hong Kong SME is typically carrying, and for what a package does and does not include before extensions are added.
- MSIG Hong Kong, commercial insurance product range: the full commercial line-up — property, liability, employees’ compensation, engineering, marine, cyber and financial lines. Cited to make the article’s central point visible: these are separate policies with separate limits, and the seams between them are where disputed claims land.
- Zurich Hong Kong, corporate property insurance: a second panel insurer, describing property cover as protecting premises, equipment and business income. That third element is the one this article argues is most often missing from a Hong Kong schedule, and it is notable that the insurer itself presents it as part of the same conversation rather than an afterthought.
- Chubb Hong Kong, SME business insurance: a third panel insurer’s packaged approach, combining material damage, business interruption, personal assault and employees’ compensation in one policy. Cited because it shows the market itself treats business interruption as a core component rather than an optional extra, which is the opposite of how it is usually bought.
- Chubb Hong Kong, Every Hong Kong SME needs a safety net: the same insurer’s own argument for why smaller Hong Kong businesses are underinsured, useful here as independent corroboration that the gaps described in this article are market-wide rather than a broker’s sales point.
- Employees’ Compensation Ordinance (Cap. 282): the statute behind the sixth exposure named here. Every employer in Hong Kong must maintain employees’ compensation insurance covering liability for injury at work. It is compulsory, it is separate from public liability, and no commercial property policy satisfies it — a distinction that catches occupiers who assume one commercial schedule covers everything commercial.
- Labour Department, Employees’ Compensation Ordinance — employer obligations: the Labour Department’s summary of those duties, including the fact that the obligation attaches to employment itself rather than to headcount or permanence. Cited because part-time and casual staff in a small commercial premises are exactly the group assumed to fall outside it.
- Insurance Authority, consumer education — frequently asked questions: the regulator’s material on disclosure, on claims deadlines and on checking who you are dealing with: “The status of all registered intermediaries can be found in the Register of Licensed Insurance Intermediaries on the Insurance Authority (IA)’s website.” Disclosure matters especially on commercial property, where the trade carried on and the fit-out installed are the facts the rating depends on.
- Expat Insurance provider pricing file (2026): the source of the indicative observations here about how commercial property is rated, how an extended indemnity period is priced against a twelve-month default, and where extensions such as glass and water damage sit. Client confidential information. Our policy and pricing documents are shown to clients in full during the advisory process, so you see every option we put in front of you.
Disclaimer: insurance products, benefit schedules, premium rates and the rules that govern them in Hong Kong change frequently, and linked content may be updated or become out of date after publication. This article is general information only and is not personal financial, insurance, legal or tax advice. Any figures given are indicative ranges, not quotations, and what is right for you depends entirely on your own circumstances, health and plans. Our policy and pricing documents are client-confidential and are shown to clients in full during the advisory process, so you can see every option we put in front of you. Please contact us, call +852 3563 9771 or request a quote before making any decision.
