Insurance & Reinsurance 2025 Comparisons

The main sources of insurance and reinsurance law in China include:

• the Civil Code of the People’s Republic of China (hereinafter referred to as the “Civil Code”) and the interpretations of the Supreme People’s Court of the application of the Civil Code;
• the Insurance Law of the People’s Republic of China;
• the Interpretation of the Supreme People’s Court on Several Issues in the Application of the Insurance Law of the People’s Republic of China (I), (II), (III) and (IV), issued by the Supreme People’s Court;
• the Maritime Law of the People’s Republic of China (in respect of marine insurance);
• the Civil Procedure Law of the People’s Republic of China (hereinafter referred to as the “Civil Procedure Law”), the Arbitration Law of the People’s Republic of China (hereinafter referred to as the “Arbitration Law”), etc (in respect of procedural law); and
• other relevant laws and regulations promulgated by the National People’s Congress, the State Council, the National Financial Regulatory Administration (NFRA), etc.

The NFRA regulates insurance and reinsurance activities in China.

In March 2023, the NFRA was established on the basis of the former China Banking and Insurance Regulatory Commission (CBIRC) as an institution functioning directly under the oversight of the State Council.

The NFRA is responsible for supervising the financial industry, excluding the securities industry. It strengthens institutional supervision, behavioural supervision and functional supervision, and is responsible for protecting the rights and interests of financial consumers. Additionally, it enhances risk management and investigates and punishes illegal financial behaviours according to the law.

In addition to the aforementioned laws and regulations, in order to promote the high-quality development of the insurance industry, the NFRA has formulated regulations, including the Management Measures for Insurance Sales Behavior, the Notice on Strengthening and Improving the Supervision of Internet Property Insurance Business and the Notice on Promoting the Development of Exclusive Commercial Pension Insurance.

According to the Insurance Law, all insurers or reinsurers approved by the NFRA are entitled to underwrite insurance and reinsurance business. The requirements for underwriting consumer insurance, SME insurance and corporate insurance do not significantly differ.

The minimum registered capital requirement for an insurance company is CNY200 million, and the registered capital shall be fully paid up in cash.

In terms of solvency, the Administrative Provisions on the Solvency of Insurance Companies (2021) stipulates that insurance companies are required to meet the following requirements:

• the core solvency adequacy ratio is not less than 50%;
• the comprehensive solvency adequacy ratio is not less than 100%; and
• the comprehensive risk rating is grade B or above.

An insurer that fails to meet any of the foregoing requirements is considered to be a solvency-deficient company.

Excess layers insurance is defined as an insurance product, the name of which varies from insurer to insurer, for which the underwriting of excess layers is still governed by the relevant laws and interpretations of the Insurance Law.

With regard to the taxation of premium, the regimes are as follows:

• VAT (6%) – premium income derived from agriculture and livestock insurance, life insurance with a maturity of more than one year, insurance provided by domestic units and individuals for export goods, specific international shipping insurance, etc are exempt from VAT;

• urban maintenance and construction tax (7% for urban taxpayers; 5% for taxpayers located in counties or townships; 1% for taxpayers residing in places other than cities, counties or townships);
• educational fees and local educational surcharges paid by individual insurance agents for providing insurance agency services to insurance companies (3%);
• stamp duty – property insurance, including property damage insurance, liability insurance, guarantee and credit insurance (excluding reinsurance contracts) businesses are subject to stamp duty (0.1% of the insured amount), whereas life insurance businesses are exempt from stamp duty; and

• corporate income tax (25%).

In China, all entities engaged in insurance business must obtain authorisation or licensing from the NFRA. The establishment of overseas insurers or reinsurers is mainly governed by the Administrative Regulations of the People’s Republic of China on Foreign-funded Insurance Companies and the Implementation Rules of the Regulations of the People’s Republic of China on Foreign-funded Insurance Companies (hereinafter referred to as the “Implementation Rules on Foreign-funded Insurance Companies”).

The forms of establishment of foreign insurers or reinsurers in China include wholly foreign-owned insurance companies, joint-venture insurance companies, and subsidiaries of foreign insurance companies.

China’s market access restrictions on foreign-funded insurance companies have been gradually relaxed. In 2004, the Implementation Rules on Foreign-funded Insurance Companies required that the share of foreign investment in the establishment of a joint-venture life insurance company should not exceed 50%; in 2019, the upper limit of the foreign share was revised to 51%, and restrictions such as “opening a representative office for two years” and “30 years of operation” were cancelled. In 2021, the Implementation Rules on Foreign-funded Insurance Companies were revised again, where the upper limit of foreign share was changed to 100%.

A foreign insurance company applying for establishment in China shall meet the following requirements:

• total assets of not less than USD5 billion at the end of the year before the application for establishment is applied;
• the country or region where the foreign insurance company belongs shall have a sound insurance supervision system, and the foreign insurance company shall already be effectively supervised by the relevant authorities of the country or region;
• the foreign insurance company shall meet the solvency standards of the host country or region;
• the relevant authorities of the host country or region shall approve its application; and
• other prudential conditions prescribed by the insurance regulatory authority of the State Council shall be met.

Reinsurance is permitted in China. Generally speaking, insurance cedents must retain some of the risks themselves and may not cede all of the risks to the reinsurers.

According to Article 103 of the Insurance Law, the liability of an insurance company for the scope of the maximum loss that may be caused by an insurance accident shall not exceed 10% of the sum of its actual capital funds plus provident fund; any excess portion shall be reinsured.

It is stipulated in the Administrative Provisions on Reinsurance Business that, with the exception of aerospace insurance, nuclear insurance, petroleum insurance and credit insurance, where a direct insurance company cedes out a direct insurance business for property insurance by means of proportional reinsurance, the total proportion of each risk unit to be ceded to the same reinsurer shall not exceed 80% of the insured amount or the limit of liability of the direct insurance contract underwritten by the cedent.

With the gradual liberalisation of the insurance market and the intensification of competition, insurance companies need to respond to market pressures, increase their market share and enhance profitability through M&A activities and other strategies. The government has issued a series of documents to encourage the healthy development of the insurance industry while simultaneously providing more M&A opportunities.

There are two primary paths for insurance company M&A: an increase in registered capital and equity transfer.

To achieve their transaction purpose, some insurance companies may opt to increase their registered capital and transfer equity simultaneously, depending on the specific circumstances of the project.

When insurance companies face solvency pressures, increasing registered capital can serve a dual purpose: it improves their solvency ratios and provides the necessary funds to support their business development. For insurance companies, increasing registered capital is a crucial means of replenishing capital, so that they can ensure solvency adequacy and achieve their future strategic development goals.

Insurance products can be distributed through:

• insurers;
• insurance intermediaries, including insurance agents and brokers; and
• insurance salespersons.

Except for the foregoing institutions and persons, institutions and individuals are not allowed to engage in insurance sales activities. Insurers should obtain an insurance business licence to carry out insurance business and direct sales.

Insurance sales personnel include individual insurance agents and individuals employed or engaged by insurers, insurance agents and insurance brokers. Individuals should be registered to carry out sales activities.

An insurance agent is an institution that handles insurance business on behalf of the insurer within the scope authorised by the insurer, including specialised agencies and concurrent-business agencies (such as bancassurance). An insurance broker acts for the interests of the insured and provides intermediary services for the conclusion of insurance contracts between the insured and insurers. To carry out insurance business, insurance agents must obtain an insurance agent licence from the regulator, while insurance brokers must obtain an insurance broker licence.

If insurance products are distributed through internet platforms or over the telephone, the distributors should also meet the regulatory requirements. For example, internet insurance business is generally governed by the Measures for the Regulation of Internet Insurance Business. Telemarketing of insurance products is subject to the Administrative Measures for the Telemarketing Business of Personal Insurance Products and the Notice on Regulating the Order of Telemarketing to Prohibit Phone Harassment by Property Insurance Companies, etc.

As for reinsurance products, the cedant may directly enter into a contract with the reinsurer or select the reinsurer through an insurance broker for reinsurance business.

Chinese law does not make a distinction between consumer contracts and commercial contracts with respect to the disclosure obligation.

For non-maritime insurance contracts, where the insurer makes enquiries about the subject matter of the insurance or the insured to conclude an insurance contract, the policyholder is obliged to make a truthful disclosure. The policyholder bears the obligation only when the insurer makes an enquiry, and the scope of information disclosure is limited to the content of the enquiry. For matters beyond the enquiry, the policyholder does not have the obligation to inform the insurer.

For marine insurance contracts, before the contract is concluded, the insured shall truthfully inform the insurer of the material circumstances, which the insured has knowledge of or ought to have knowledge of in his or her ordinary business practice, and which may have a bearing on the insurer in deciding the premium or whether they agree to insure or not.

The difference between non-maritime and marine insurance contracts with regard to the disclosure of information about risk is that the insured of a marine insurance contract has the obligation to inform the insurer truthfully and proactively. However, the insured of a marine insurance contract need not inform the insurer of the facts that the insurer has knowledge of, or ought to have knowledge of, in his or her ordinary business practice if the insurer made no enquiry to that end.

The legal consequence arising from a party’s failure to comply with the obligation of informing truthfully includes two main aspects: the right to rescind the insurance contract and refusal to make compensation for the insured event.

Right to Rescind the Insurance Contract

If the policyholder, intentionally or due to gross negligence, fails to perform the obligation of truthful disclosure, thus affecting the insurer’s decision on underwriting or increasing the premium rate, the insurer shall have the right to rescind the contract.

Refusal to Make Compensation for the Insured Event

If the policyholder intentionally fails to perform the obligation of truthful disclosure, the insurer shall not be liable to make compensation or payment of insurance monies for insured events that occurred before the rescission of the contract, and shall not refund the premiums.

If the policyholder, due to gross negligence, fails to perform the obligation of truthful disclosure, which has a serious impact on the occurrence of the insured event, the insurer shall not be liable to make compensation or payment of insurance monies for insured events that occurred before the rescission of the contract, but shall refund the insurance premiums.

The insurer shall not rescind the contract if they are aware of the policyholder’s failure to perform the obligation of truthful disclosure at the time of the conclusion of the contract. The insurer shall be liable to make compensation or payment of insurance monies for the insured events.

Insurance intermediaries involved in an insurance contract include insurance agents and insurance brokers. Generally speaking, insurance agents are more concerned with the interests of insurers, while insurance brokers act for the interests of their clients, providing them with objective and neutral insurance schemes.

Insurance Agents

An insurance agent is an organisation or an individual that is entrusted by an insurer to handle insurance business on behalf of the insurer – within the scope authorised by the insurer – and to collect commissions from the insurer. Types of insurance agents include specialised agencies, concurrent-business agencies and individual insurance agents. An insurance agent shall not engage in insurance agency services beyond the business scope and operation area of the insurer it represents.

A specialised insurance agency may engage in all or part of the following business:

• sale of insurance products as an agent;
• collection of insurance premiums on an agency basis; and
• survey of losses and settlement of claims for insurance agency-related business, etc.

Insurance Brokers

An insurance broker is an organisation that provides intermediary services for the conclusion of insurance contracts between policyholders and insurers, based on the interests of the policyholder, and collects commissions in accordance with the law. Insurance brokers include insurance broker companies and their branches. Likewise, insurance brokers shall not engage in insurance broking services beyond the business scope and operation area of the underwriting insurer.

An insurance broker may operate all or part of the following business:

• drafting insurance plans for policyholders, selecting insurance companies and processing insurance application formalities;
• assisting insured parties or beneficiaries in making claims;
• carrying out reinsurance brokerage businesses; and
• providing disaster prevention, loss prevention, risk evaluation, risk management advisory services, etc, to entrusting parties.

An insurance contract shall be concluded in written form. The insurer shall promptly issue an insurance policy document or another insurance certificate to the policyholder once an insurance contract is concluded.

According to the Insurance Law, a life insurance policyholder shall, at the time of conclusion of the insurance contract, have insurance interests in the insured party. An insured party in a property insurance policy shall, at the time of occurrence of an insured event, have insurance interests in the subject matter of insurance. “Insurance interests” refers to the interests of a policyholder or an insured party in the subject matter of insurance recognised by the law.

To satisfy the minimum requirements of Chinese law, an insurance contract shall include the following:

• name and address of the insurer;
• name and address of the policyholder and the insured party, and name and address of the beneficiary of a life insurance policy;
• subject matter of insurance;
• insurance liabilities and exclusion of liability;
• insurance period and date of commencement of insurance liabilities;
• insurance amount;
• premium and payment method;
• method of compensation or payment of insurance monies;
• default liability and dispute resolution; and
• date of conclusion of the contract.

In addition to the foregoing, the policyholder and the insurer may agree on other matters pertaining to the insurance in the insurance contract.

Under Chinese law, the business scope of insurers is categorised into life insurance and property insurance. Life insurance includes life insurance, health insurance and accident insurance; and property insurance includes property damage insurance, liability insurance, credit insurance and guarantee insurance. “Beneficiary” is a specific term that appears in life insurance contracts.

In a life insurance contract, the beneficiary is the individual who is designated by the insured party or the policyholder, and this individual has the right to make insurance claims. The insured party or the policyholder may designate one or several persons as the beneficiary(ies). Both the policyholder and the insured party are allowed to be the beneficiary.

Where there are several beneficiaries, the insured party or the policyholder may determine the sequential order of the beneficiaries and the share for each beneficiary; where the share for each beneficiary is not determined, the beneficiaries shall be entitled to beneficial rights in equal share.

The appointment of a beneficiary by the policyholder shall be subject to the consent of the insured party. A policyholder who takes up life insurance for his/her employee(s), with whom the policyholder has an employment relationship, shall not designate any person other than the insured party and his/her immediate relatives as the beneficiary. Where an insured party is a person without, or with limited, capacity for civil conduct, his/her guardian may designate the beneficiary.

The differences between consumer insurance contracts and reinsurance contracts in Chinese law and insurance practices can be outlined as follows.

• The parties involved: Consumer insurance contracts involve the policyholder (consumer) and the insurer in a direct insurance relationship. Reinsurance contracts involve the cedant and the reinsurer, where the risk of insurance is transferred to the reinsurer.
• The subject matter: The subject matter insured in consumer insurance contracts includes property, life expectancy, physical body, liability, credit and interests relating to property. The subject matter of reinsurance contracts is the liability of the original insurer, which has the nature of liability insurance.
• Disclosure obligations: In consumer insurance contracts, the policyholder bears the disclosure obligation, whereas in reinsurance contracts, the cedant shall, at the request of the reinsurer, notify the reinsurer in writing of the relevant information pertaining to the liability borne by the cedant and the original insurance.
• Nature and purpose of contracts: Consumer insurance contracts are primarily designed to protect the interests of and provide risk coverage for consumers. Reinsurance contracts, on the other hand, are a means of insurance companies transferring risk, and are not duplicate insurance or co-insurance in nature.
• Contract interpretation principles: Where there is a dispute over a contract clause between an insurer and the policyholder, insured party or beneficiary of a consumer insurance contract concluded by adopting the standard clauses provided by the insurer, interpretation shall be made using normal reasoning. Where there are two or more interpretations of the contract clause, the interpretation that is in the interest of the insured party and the beneficiary shall be adopted.

In the Chinese alternative risk transfer (ART) transaction market, catastrophe bonds and captive insurance are two of the more common types of ART transaction.

China’s catastrophe bonds are still in the initial stages of exploration. Chinese insurance companies have made several attempts to issue catastrophe bonds overseas. In 2021, the CBIRC issued the Notice on Matters Relating to the Issuance of Catastrophe Bonds by Domestic Insurance Companies in the Hong Kong Market, which supports domestic insurance companies intending to issue catastrophe bonds in the Hong Kong market. In the operating model of catastrophe bonds, the cedant enters into a reinsurance contract with a special purpose insurer to reinsure the relevant catastrophe risk. The special purpose insurer acts as an issuer and issues catastrophe bonds to investors, directly or through an agent.

As for captive insurance, according to the Notice on Issues Concerning the Supervision of Captive Insurance Companies, a captive insurance company refers to an insurance company solely invested by a parent company or jointly invested by a parent company and its holding subsidiaries upon approval from the China Insurance Regulatory Commission. It is established only to provide property insurance, short-term health insurance and short-term accident insurance for the parent company, and for its holding subsidiaries and their employees. The regulators recognise the captive insurance company as a special form of insurance company.

There are no known cases where the regulatory authorities within China have acknowledged overseas ART transactions as reinsurance contracts.

When it comes to the interpretation of contract terms, Article 1 of the Interpretation of the Supreme People’s Court on Several Issues Concerning the Application of the General Principles of Contract Part of the Civil Code is usually referred to. This article stipulates that when interpreting contractual terms, the people’s court should determine the meaning based on the general meanings of words, taking into account the relevant clauses, the nature and purpose of the contract, customs and the principle of good faith, with reference to the context of the contracting, the negotiation process, the performance and other factors.

Concerning the interpretation of insurance contracts, some particular rules apply.

The Principle of Good Faith

Pursuant to the principle of good faith stipulated in Article 5 of the Insurance Law, an insurance contract shall be interpreted with honesty and trustworthiness.

Special Interpretation

An insurance contract is a standardised text with uniform clauses. However, in practice, both parties to the contract will often further negotiate on changes in various conditions, and most of them amend the original contract clauses in the form of annotations, additional clauses and endorsement slips. When the modification is inconsistent with the original contract terms, the interpretation principles stating that comments are superior to the text, later comments are superior to the first comments, writing is superior to printing, appended comments are superior to text comments, the express conditions are superior to the implied conditions and handwritten comments are superior to printed comments are adopted.

Contra Proferentem Rule

Pursuant to Article 30 of the Insurance Law, if there is a dispute over a contract clause concluded by adopting the standard clauses provided by the insurer, interpretation shall be made according to common understanding. Where there are two or more interpretations of the contract clause, the interpretation that is in the interest of the insured party and the beneficiary shall be adopted.

However, in the context of reinsurance contracts, both parties specialise in insurance business and are generally on an equal footing, possessing symmetrical information and equivalent negotiation capabilities. Consequently, there is no concern about one party being disadvantaged or lacking autonomy of will. Therefore, when disputes arise over the terms of a reinsurance contract, the contra proferentem rule should not be applied.

Use of Extraneous Evidence

Extraneous evidence may be permitted, such as evidence about the negotiations, the circumstances in which the contract was placed or the “usual practice” or understanding in relation to such contracts or particular terms therein. Moreover, the Basic Terminology of Insurance jointly issued by the State Administration for Market Regulation and the Standardization Administration serves as another crucial reference for interpretation.

Warranties are not identified in the Insurance Law. However, when it comes to marine insurance contracts, the Maritime Law of the People’s Republic of China and relevant interpretations made by the Supreme People’s Court stipulate the application and legal consequence of warranties.

In the context of marine insurance contracts, the insured shall immediately notify the insurer in writing of any breach of warranties. After such notice has been received, the insurer may dissolve the contract, or may require amendments to the conditions of insurance or increase the insurance premium. If the insurer fails to reach an agreement with the insured on matters such as modifying the underwriting conditions or increasing the premium after receiving the notice, the insurance contract shall be terminated on the date of breach of the warranty.

According to the Insurance Law, there are no statutory conditions precedent. However, specific insurance contracts may allow the parties to stipulate conditions precedent and the consequences of breach thereof. For instance, in an export credit insurance contract, the parties typically stipulate dispute precondition clauses beforehand, which are usually worded as follows: “For claims arising from the buyer’s refusal to pay the purchase price due to trade disputes, unless the insurer provides written consent, the insured must first pursue arbitration or initiate a lawsuit in the country (or region) where the buyer is located. The insurer shall not assess the loss or settle the claim until the insured obtains an effective award or judgment and applies for its enforcement”.

Disputes over insurance contract coverage are typically addressed by first examining the contract terms. Clear terms are enforced as written, and when terms are ambiguous, extrinsic evidence like negotiation details and industry practices may be considered, along with relevant laws. Consumer contracts are subject to consumer protection laws. Ambiguities are often resolved in the consumer’s favour according to the contra proferentem rule, and insurers have greater pre-contractual information duties. In reinsurance contracts, the contra proferentem rule does not apply as strongly due to the equal bargaining power of the parties involved.

Pursuant to Article 26 of the Insurance Law, the limitation of action for a life insurance contract dispute is five years, while for non-life insurance contract disputes it is two years. However, following the enactment of the Civil Code, some courts also argue that, in accordance with the principle of lex posterior derogat legi priori (“the new law supersedes the old law”), a three-year limitation of action should be applied to non-life insurance disputes (refer to the case of “Dispute over the Property Insurance Contract between Shanghai Jinhai Labor Service Co, Ltd and the Shanghai Branch of China Pacific Property Insurance Co Ltd” ((2019) Hu 0109 Min Chu No 22082).

Typically, an unnamed beneficiary or other third party cannot enforce an insurance contract. However, pursuant to Article 65 of the Insurance Law, in a liability insurance contract dispute, an insurer shall make direct compensation to a third party at the request of an insured if the compensation liability of the insured towards the third party is determined. And where the insured does not make the request, the third party shall have the right to directly request that the insurer makes compensation in respect of the portion of the compensation it should receive.

Jurisdiction

Insurance disputes should adhere to the rules of exclusive jurisdiction, hierarchical jurisdiction and territorial jurisdiction stipulated in the Civil Procedure Law.

To comply with exclusive jurisdiction, the people’s courtat the location of a real estate/port has jurisdiction over any real estate dispute lawsuit/lawsuit regarding a dispute arising in port operations.

As for hierarchical jurisdiction, there are four levels of courts in China: the primary people’s courts, intermediate people’s courts, high people’s courts and the Supreme People’s Court. People’s courts having jurisdiction over trial of first instance are generally determined according to the significance and the amount of an insurance dispute.

As for territorial jurisdiction, generally speaking, the people’s court at the location of the defendant’s domicile or the insurance subject matter shall have jurisdiction with respect to an insurance contract dispute lawsuit.

Choice of Law

Pursuant to the Insurance Law and the Law of the People’s Republic of China on the Application of Laws to Foreign-related Civil Relations, no regulation has been stipulated regarding the jurisdiction and choice of law for insurance disputes. The jurisdiction of insurance disputes should be determined in accordance with Chapter 2 of the Civil Procedure Law, while the law applicable to foreign-related insurance disputes, pursuant to Article 41 of the Law of the People’s Republic of China on the Application of Laws to Foreign-related Civil Relations, can be negotiated and chosen by the parties concerned. If the parties concerned have not made a choice, the party whose fulfilment of obligations can best realise the contract features, the laws of his or her regular residence or other laws that have the most relevance to the contract shall apply.

In deciding cases, the Chinese courts follow the system whereby the court of second instance is also the court of last instance. Compared to common law countries, judges in China may have greater authority not only to actively question both parties involved, but also to actively ascertain the facts.

Usually, litigation proceedings are initiated based on the plaintiff’s lawsuit; such proceedings include general procedures, summary procedures, special procedures, etc.

Where a litigant disagrees with a judgment or ruling of the first instance, they have the right to file an appeal with a higher-level people’s court. The court of second instance shall examine the relevant facts and applicable laws in response to the appeal requests.

A litigant who deems that there is an error in a judgment or ruling that has come into legal effect may apply to a higher-level people’s court for a retrial. Enforcement of the judgment or ruling shall continue where the litigants apply for retrial.

Regarding non-foreign-related insurance disputes, pursuant to Article 235 of the Civil Procedure Law, judgments that have come into legal effect shall be enforced by the people’s court of first instance or a people’s court at the location of the enforced property at the counterpart level of the people’s court of first instance.

Where a foreign judgment requires enforcement by a court in China, a party may directly apply to the intermediate court with jurisdiction for such enforcement. Alternatively, the foreign court may request enforcement by a court in China, in accordance with the provisions of an international treaty to which both the foreign country and China are parties or based on the principle of reciprocity. Upon review, if it is determined that the enforcement does not contravene the fundamental principles of Chinese law or harm China’s sovereignty, security or public interests, an enforcement order shall be issued to enforce such judgment.

Pursuant to Article 2 of the Arbitration Law, arbitration clauses in commercial insurance and reinsurance contracts can be enforced. However, an arbitration clause should have certain elements, including:

• the expression of an application for arbitration;
• items for arbitration; and
• the chosen arbitration commission.

Where an arbitration clause has not specified, or has not specified clearly, items for arbitration or the choice of an arbitration commission, the parties concerned may conclude a supplementary agreement. If a supplementary agreement cannot be reached, the arbitration clause shall be void.

Enforcement of Domestic Arbitral Awards

Pursuant to Article 248 of the Civil Procedure Law, a party can apply for the enforcement of an arbitration award made domestically where the other party does not perform, unless the arbitration award falls under the special circumstances listed in Article 248.

Enforcement of Foreign Arbitral Awards

China adopted the 1958 Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the New York Convention) on 2 December 1986, with two reservations: the principle of reciprocity and the commercial reservation. Furthermore, Chinese domestic courts are obligated to recognise and enforce arbitral decisions made in other contracting parties to the New York Convention in accordance with the Convention’s terms.

To enforce arbitral awards made in other jurisdictions, pursuant to Article 304 of the Civil Procedure Law, a litigant may apply directly to the relevant intermediate court. Where the domicile of the person or the properties are not located in China, the litigant may apply to the intermediate court at the domicile of the applicant or at a location that has an appropriate connection with the dispute. The court shall handle the matter pursuant to the international treaty concluded or acceded to by the People’s Republic of China, or under the principle of reciprocity.

Alternative dispute resolution (ADR), including mediation, plays a pivotal role in the resolution of insurance disputes in China as part of the country’s modernisation of its governance system and capabilities. Pursuant to Article 9 of the Civil Procedure Law, the court trying civil cases shall carry out mediation pursuant to the principles of voluntary participation and legitimacy. In practice, mediation is typically organised by judges or specially invited mediators.

Additionally, in line with the spirit of the Opinions of the Supreme People’s Court on Further Deepening the Reform of the Diversified Dispute Resolution Mechanism in the People’s Courts, China aims to further improve ADR mechanisms such as the lawyer mediation system, neutral evaluation system, uncontested factual recording mechanism, uncontested mediation plan approval mechanism, etc.

Pursuant to Article 23 of the Insurance Law, upon receiving a claim for compensation, the insurer must promptly conduct an assessment and inform the insured or the beneficiary of the outcome thereof. If the claim is found to be within the scope of insurance liability, the insurer is obligated to fulfil the compensation within 10 days. If the insurance contract sets a deadline for compensation or payment, the insurer must adhere to these contractual provisions.

If the insurer fails to fulfil its obligation to provide timely compensation, it not only has to pay the insurance monies but also must compensate for any losses resulting from its delay. Moreover, the insurer may be ordered by the insurance regulatory authorities to be subject to a fine ranging from CNY50,000 to CNY300,000.       

Pursuant to Article 60 of the Insurance Law, where the occurrence of an insured event is due to damages made by a third party, the insurer shall, with effect from the date of making compensation of insurance monies to the insured party, exercise subrogation rights within the scope of the compensation amount to claim for compensation from the third party.

However, an insurer shall not exercise subrogation rights to claim for compensation from the family members of the insured party or its members, except if the insured event is caused intentionally by the family members of the insured party or its members.

Insurtech developments brought new life to the insurance industry and influence almost every aspect of insurance operations. Digitalisation, artificial intelligence (AI) and big data are among the most crucial developments.

Digitalisation

Through digitalisation, insurance operations can be carried out online, such as marketing and advertising of the insurance products, conclusion of the insurance contracts, and submission of claims after the insured event happens, etc.

AI Applications

Before the insurance contracts are concluded, AI can help characterise the user and act as customer service staff for insurance companies. It can also help generate marketing and insurance plans. During the insurance period, AI can aid determination of the health status of the insured of a life insurance contract and provide medical assistance.

After an insured event happens, AI can help assess responsibility and loss. Moreover, AI can help detect risks and fraud cases, and thus provide intelligent risk control and anti-fraud measures.

Big Data

Big data technology can help insurance companies to characterise potential policyholders, and the companies can in turn recommend and advertise suitable insurance products to users and customise the premium pricing.

Big data technology also plays an important role in the field of anti-fraud. Insurance companies can prevent and reduce insurance fraud by integrating and analysing vast amounts of data, such as personal history, social media activities and financial transaction information, to identify unusual behaviour patterns and risk signals.

The regulator holds a supportive attitude towards the insurtech developments in China.

The Fourteenth Five-Year Plan for Standardization in the Chinese Insurance Industry, released by CBIRC, encourages strengthening industry standards in the field of insurtech, formulating relevant application standards in the fields of big data, AI, cloud services, blockchain, next-generation Internet, smart health, internet of things, etc, and standardisation to promote insurtech innovation.

The regulator also encourages the insurance industry to co-operate with third-party institutions, data service providers and other industries to enhance synergy.

In the meantime, risk control is also being emphasised. For example, as stipulated in the Notice on Strengthening Internet Applications for the Banking and Insurance Industries released by the NFRA, insurance companies should be responsible for the implementation of compliance requirements in business requirements, product development and the promotion and operations of internet applications.

For insurance institutions outsourcing IT activities to a third-party institution, it is stipulated in the Notice on Promulgation of the Measures for the Regulation of IT Outsourcing Risks of Banking and Insurance Institutions released by CBIRC that such insurance institutions should establish IT outsourcing management systems to control risks concerning cybersecurity and data security, etc.

The emerging risks that affect the insurance market in China are diverse, encompassing cybersecurity, increased longevity and illegal financial activities, etc.

Cybersecurity

With the rapid development of digitalisation, cybersecurity has become an increasingly prominent issue. Cyber-risks such as data breaches, network collapse and network attacks can cause significant financial and reputational damage to entities. Thus, corresponding insurance products are needed to spread these risks.

Increased Longevity

As medical technology and living standards improve, people’s longevity has increased – this poses new challenges to the insurance industry, especially in the field of life insurance.

Illegal Financial Activities

Illegal financial activities pose a great threat to the insurance industry, undermining its stability and integrity. These activities, which may include insurance fraud, unauthorised insurance sales and money laundering through insurance products, can lead to significant financial losses for insurance companies and their customers, which also distort the competitive landscape by giving rise to unfair practices that harm honest insurers and policyholders alike.

Cybersecurity

To protect entities from losses due to network attacks, data breaches and network collapse, two categories of cybersecurity insurance, cybersecurity property insurance and cybersecurity liability insurance, are being piloted according to the Notice of the General Office of the Ministry of Industry and Information Technology on organising the pilot work of network security insurance services.

Cybersecurity property insurance mainly protects the direct losses of the first party caused by cybersecurity incidents and the resulting technical service costs, including direct physical losses, business interruption losses, data asset replacement costs, hardware improvement costs and emergency disposal costs, as well as public relations costs and legal costs.

Cybersecurity liability insurance mainly protects the liability of third-party individuals or institutions caused by network security incidents, including data breach liability, network security incident liability and media infringement liability.

Increased Longevity

As is stated in the Guiding Opinions on Further Improving the Level of Adaption to Increased Longevity of Financial Services released by the NFRA, financial institutions should promote the development of financial products suitable for the elderly.

Insurance companies should appropriately raise the upper limit of the age of the insured, scientifically and appropriately adjust the insurance conditions, and provide reasonable protection for the elderly with anamnesis and chronic diseases. Moreover, insurance companies should develop accident insurance products that meet the needs of those in different age groups and with different occupations, thus supporting the needs of the elderly to start businesses, find employment and exercise.

Furthermore, to better meet people’s diverse elderly care needs, the NFRA issued the Notice on Issuing Interim Measures for Supervision and Administration of Endowment Insurance Companies in November 2023.

Illegal Financial Activities

The Notice on Promulgating Measures for the Management of Criminal Cases involving Financial Institutions was released by the NFRA to better curb illegal financial activities. Moreover, the Economic Crime Investigation Bureau of the Ministry of Public Security and the Inspection Bureau of the NFRA have jointly decided to carry out a seven-month “special fight” against insurance fraud crime, from the end of April to the end of November 2024.

The Notice on Promulgating Measures for the Management of Criminal Cases Involving Financial Institutions

The Notice on Promulgating Measures for the Management of Criminal Cases involving Financial Institutions issued by the NFRA is aimed at standardising the management of criminal cases involving financial institutions, clarifying the responsibilities of financial institutions and establishing an efficient working mechanism.

The Guiding Opinions on Further Improving the Level of Adaption to Increased Longevity of Financial Services and the Notice on Matters Concerning the Vigorous Development of Commercial Insurance Annuities

The purpose of these two documents issued by the NFRA is to promote the vigorous development of commercial insurance annuities to meet people’s diverse needs for pension security and wealth management, and to optimise products and services to further enhance the adaptability of financial services to the aging population.

The Notice on Strengthening Internet Applications for the Banking and Insurance Industries

The Notice on Strengthening Internet Applications for the Banking and Insurance Industries issued by the NFRA is aimed at improving service quality, standardising internal management, clarifying compliance requirements and strengthening business compliance and risk management.

The Regulation on Network Data Security Management

The Regulation on Network Data Security Management, promulgated by the State Council on 24 September 2024, will come into effect on 1 January 2025. Regulating network data-handling activities, ensuring the security of network data and promoting the reasonable and effective use of network data, the Regulation will greatly impact cybersecurity property insurance and cybersecurity liability insurance in China.