The General Insurance Council of the Hong Kong Federation of Insurers today (Tuesday, 9 December 2003) informed members of the public that beginning 1 January 2004, there may be a limited supply of employees compensation insurance for the medical profession. However, as far as other industries are concerned, the general insurance industry may still be able to provide them with sufficient supply of employees compensation insurance.

This change of commercial decision is a result of prudent risk management, which is deemed necessary following the emergence of SARS, in dealing with the extremely high exposure of the medical profession to infectious diseases. It is a known fact that infectious diseases could emerge suddenly and spread widely and easily from one work place to another. As such, the risk involved is unquantifiable. Thus, in order for an insurance company to underwrite such risks, it has to have unlimited capital to meet the potentially unlimited claims liability. However, like any other commercial enterprises, all reinsurance companies and direct insurance companies have only limited capital to back up their businesses.

As a measure to limit the exposure to a commercially acceptable level, reinsurers are making it clear that infectious disease can only be covered on a person by person basis in simple terms. Insurers are therefore faced with the burden of an unknown risk of loss accumulation as they must carry the first part of an individual claim themselves. This will result in direct insurers faced with unknown net aggregate exposure. Coupled with the statutory solvency requirement, direct insurers are unlikely to continue providing the same capacity of employees compensation insurance to the more hazardous trades, e.g. the medical profession. This situation, is unfortunately, beyond the control of both reinsurers and insurers who, like any other commercial operation, are running their businesses with a limited capital. Moreover, insurance companies have to meet their claims liabilities with adequate solvency margin.

In the past few months, the insurance industry had held several meetings with the Insurance Authority and other government departments proposing several options to addressing the matter e.g. the establishment of funds, the review of the Employees' Compensation Ordinance, etc. In view of the statutory requirement of the Employees' Compensation Ordinance that employers must provide their employees with employees compensation protection during their course of employment, private hospitals, clinics and medical organizations are strongly advised to look into the matter as soon as possible.