By Jennifer Hughes and Sumeet Chatterjee
HONG KONG (Reuters) - A Hong Kong insurance provider is to stop offering cover against the possibility of HNA-controlled Hong Kong Airlines folding, according to a notice issued by the insurer to its agents and seen by Reuters.
Blue Cross Asia-Pacific Insurance Ltd, owned by Bank of East Asia <0023.HK>, said in the notice that it would stop the provision for customers as of Monday.
The note, first reported by the South China Morning Post, said the benefit item of "Special Allowance - Winding-up of Airline" would not apply to single-trip travel insurance plans issued on or after Jan. 7 for travellers on Hong Kong Airlines.
It said the move was taken in light of "news of Hong Kong Airlines published by media recently".
Hong Kong Airlines said in a statement it did not have a business relationship with Blue Cross.
"We are operating as normal and remain committed to offering our best service to customers," the airline said. "We are here to stay and remain committed to sustaining our long-term growth."
A Beijing-based spokeswoman for HNA declined to comment.
Blue Cross said in a statement to Reuters the decision was "solely made based on commercial considerations".
Several Hong Kong insurers offer payouts in the event of an airline collapse although the cover is not as common worldwide.
Under Blue Cross's online travel insurance offer, policy holders can claim up to HK$2,000 ($255) if they have paid for a ticket on an airline which publicly announces it is winding up prior to the journey.
Hong Kong Airlines reassured customers of its financial soundness last month after a series of high-level executive departures had sparked speculation it was struggling.
The low-cost airline, which operates 38 aircraft to almost 40 destinations in Asia and North America, is part of Hainan Airlines <600221.SS>, China's fourth-largest carrier and part of cash-crunched Chinese conglomerate HNA Group [HNAIRC.UL], which is in the process of selling a series of assets acquired during a $50 billion global deal spree.
The group, whose assets still include the largest single stake in Deutsche Bank <DBKGn.DE>, began its streamlining in 2017 after Beijing cracked down on aggressive overseas deal-making.
HNA's sale process is now being overseen by China Development Bank, one of its largest creditors, Reuters reported last month.
In December, financing from CDB was instrumental in Airbus resuming stalled delivery of planes to HNA-affiliated airlines.
(Reporting by Jennifer Hughes and Sumeet Chatterjee; additional reporting by Donny Kwok and Kane Wu; Editing by Stephen Coates)