The statutory regime that governs the resolution of insurance disputes in China comprises:

• the Civil Code of the People’s Republic of China (the “Civil Code”);
• the Insurance Law of the People’s Republic of China (the “Insurance Law”);
• the Interpretations of the Supreme People’s Court on Several Issues Concerning the Application of the Insurance Law of the People’s Republic of China;
• the Maritime Law of the People’s Republic of China (the “Maritime Law”); and
• other administrative regulations promulgated by the State Council and rules issued by the National Financial Regulatory Administration (NFRA), as well as local regulations implemented by various regional authorities.

The procedural regime that governs the resolution of insurance disputes in China includes:

• the Civil Procedure Law of the People’s Republic of China (the “Civil Procedure Law”);
• the Special Maritime Procedure Law of the People’s Republic of China (the “Maritime Procedure Law”); and
• the Arbitration Law of the People’s Republic of China (the “Arbitration Law”).

The litigation process in China consists of the following procedures.

• Case filing ‒ when a party submits a statement of claim to a court with proper jurisdiction and meets the filing requirements, the court must decide whether to accept the case within the statutory time limit. Once accepted, the court will serve a copy of the complaint and a summons to the defendant.
• Trial – civil cases generally follow the ordinary procedure, which includes pre-trial preparation, court hearings, evidence examination, and arguments. For less complex cases, simplified procedures or small claims procedures may be applied.
• Enforcement – after a judgment becomes effective, if the losing party fails to fulfil their obligations, the winning party may apply to the court for enforcement. The enforcement court will then take measures such as investigating assets and sealing, seizing or auctioning property.

General Rules on Limitation

Article 188 of the Civil Code stipulates that the statute of limitations for filing a civil claim with the court is three years, unless otherwise provided by law. The the statute of limitations begins on the date when the right-holder knows or should have known that their right has been infringed and who the obligor is. However, if 20 years have passed since the infringement, the court will no longer protect the right unless exceptional circumstances exist. In such cases, the court may – upon the claimant’s request – extend the the statute of limitations.

Statute of limitations under Insurance Law

According to Article 26 of the Insurance Law, for insurance types other than life insurance, the insured or beneficiary has a period of two years in which to claim compensation or payment from the insurer. This period starts from the date they knew or should have known that the insured event occurred. For life insurance, the insured or beneficiary has five years to file such claims, starting from the date they knew or should have known that the insured event occurred.

In China, ADR mechanisms are not only widely highlighted but also continuously promoted at the institutional level. For a long time, China has been committed to developing a diversified non-litigation dispute resolution system that operates in parallel with litigation. This includes various forms such as people’s mediation, administrative mediation, arbitration, notarisation, administrative adjudication, and administrative reconsideration. These mechanisms play an active role in resolving different types of disputes and have formed a multi-level and broad-coverage dispute resolution system.

At the same time, Chinese traditional culture has long valued reconciliation, prizing the concepts of “harmony is precious” and “no litigation”. As such, litigation is viewed as a disruption of social harmony. Mediation and settlement are considered more aligned with social stability and the proper handling of interpersonal relationships. This cultural foundation has provided fertile ground for the development of ADR in China.

Main Forms of ADR in China

To further improve the diversified dispute resolution system, on 28 June 2016, the Supreme People’s Court of the People’s Republic of China (the “Supreme People’s Court”) issued the Opinions on Further Deepening the Reform of the Diversified Dispute Resolution Mechanism in People’s Courts. The document explicitly states the need to rationally allocate social resources for dispute resolution and promote the organic connection and co-ordinated development between settlement, mediation, arbitration, notarisation, administrative adjudication, administrative reconsideration, and litigation. It also emphasises the leading, driving and safeguarding role of the judiciary in building the ADR system.

Currently, the most common and widely used forms of ADR in China include people’s mediation, judicial mediation, settlement, and arbitration. China’s ADR system has received strong support at both the policy and institutional levels and is playing an increasingly important role in judicial practice – becoming an essential part of building an efficient, diversified and mutually beneficial dispute resolution framework.

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

• Exclusive jurisdiction – disputes involving real estate fall under the jurisdiction of the people’s court where the property is located. Similarly, lawsuits arising from port operations fall under the jurisdiction of the people’s court where the port is located.
• Hierarchical jurisdiction – China’s court system comprises four levels (namely, primary people’s courts, intermediate people’s courts, high people’s courts, and the Supreme People’s Court). The court level responsible for the first-instance trial of an insurance dispute is generally determined based on the dispute’s significance and the amount involved.
• Territorial jurisdiction – generally, jurisdiction over insurance contract disputes lies with the people’s court where the defendant’s domicile is located or where the insured subject matter (property or person) is located.

Choice of Law

In China, disputes over marine insurance are governed by the Maritime Law, whereas other types of property insurance and life insurance disputes fall under the Insurance Law.

For foreign-related insurance disputes, Article 41 of the PRC Law on the Application of Laws to Foreign-Related Civil Relations applies – the parties may negotiate and choose the applicable law. If the parties make no choice, the law of the habitual residence of the party whose performance of obligations is most characteristic of the contract – or other laws most closely connected to the contract – shall apply.

According to Articles 298 to 300 of the Civil Procedure Law, a final and effective judgment rendered by a foreign court may be recognised and enforced in China if the following conditions are met.

• There is an applicable international treaty between China and the foreign country (or a reciprocal relationship exists between the two jurisdictions).
• The judgment does not violate the fundamental principles of Chinese law and does not prejudice China’s sovereignty, security, or public interest.
• The foreign court had proper jurisdiction.
• The respondent was lawfully summoned and given a reasonable opportunity to present arguments and defend their rights, and any party lacking legal capacity was properly represented.
• The judgment was not obtained by fraud and does not duplicate a Chinese judgment or one already recognised by China from a third country regarding the same dispute.

If the above-mentioned conditions are satisfied, an insurer – as a party to the judgment – may apply for recognition and enforcement of the foreign judgment before a Chinese court and likewise may be subject to enforcement based on such judgment.

Unlike common law jurisdictions, Chinese courts do not adopt a discovery procedure. Parties are responsible for submitting evidence within the time limits prescribed by the court. In general, the plaintiff is required to submit preliminary evidence at the time of filing, whereas the defendant must complete their evidentiary submissions during the period for filing a statement of defence.

In cross-border insurance disputes, all non-Chinese documents must be accompanied by Chinese translations.

Statute of Limitations in Insurance Disputes

As discussed in 1.2 Litigation Process and Rules on Limitation (General Rules on Limitation), according to the Insurance Law, for insurances other than life insurance, the statute of limitations for the insured or the beneficiary to claim indemnity from the insurer is two years – starting from the date on which the insured or the beneficiary knew or should have known that the insured event occurred. For life insurance, the statute of limitations is five years, starting from the same date.

However, according to the Civil Code, the statute of limitations is three years. Thus, whether the statute of limitations for insurance types other than life insurance is two or three years is currently a matter of dispute.

In general, Chinese courts will enforce arbitration provisions in insurance and reinsurance contracts, provided the arbitration agreement is valid. Under the Arbitration Law and the Civil Procedure Law, a valid arbitration agreement must include the following elements:

• an expression of intent to arbitrate;
• a clearly defined arbitration matter; and
• a designated arbitration commission or institution.

Where these conditions are satisfied, Chinese courts typically will respect the parties’ autonomy and enforce such arbitration provisions.

China acceded to the Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958 (the “New York Convention”) in 1986. Upon accession, China made two reservations pursuant to Article I(3) of the New York Convention:

• principle of reciprocity – China will only recognise and enforce arbitral awards made in the territory of other contracting states; and
• commercial reservation – China will apply the New York Convention only to arbitral awards arising from legal relationships (whether contractual or not) that are considered commercial under Chinese law.

According to the Civil Procedure Law, a party seeking recognition and enforcement of a foreign arbitral award must file an application directly with the intermediate people’s court at the place where the respondent is domiciled or where the respondent’s property is located. The application for recognition and enforcement of a foreign arbitral award must be submitted within two years from the last date for performance as specified in the award.

Arbitration is indeed a significant form of insurance dispute resolution in China. It is particularly common in the following lines of business:

• reinsurance contracts;
• large-scale property insurance, such as in the energy, marine and aviation sectors; and
• cross-border or international insurance contracts.

Disputes in these sectors typically involve high-value claims and complex legal or technical issues, leading parties to prefer arbitration for its efficiency, expertise, and procedural flexibility.

The legal framework governing arbitration in China includes:

• the Arbitration Law;
• the Civil Procedure Law; and

• the specific arbitration rules of various arbitration institutions (eg, the China International Economic and Trade Arbitration Commission (CIETAC) Arbitration Rules).

Arbitration proceedings in China are private and confidential. Moreover, arbitration in China is final and binding ‒ that is, there is no right of appeal. An award may only be challenged through a limited set of grounds in a set-aside application (eg, invalidity of the arbitration agreement or serious procedural irregularities).

According to Chinese law, certain terms – although not expressly stipulated in the insurance contract – may nonetheless be implied into the contract by operation of law and are legally binding on both parties. These implied terms are primarily derived from the Insurance Law and relevant judicial interpretations and are deemed to be inherently applicable to insurance contracts.

Commonly implied terms include the following.

Duty to Highlight and Explain Standard Exemption Clauses

The insurer must draw the policyholder’s attention to any standard exemption clauses and explain them clearly in a reasonable manner. Otherwise, such clauses shall not be effective (see Article 17 of the Insurance Law).

Insurable Interest Principle

Insurable interest refers to a legally recognised interest that the policyholder or the insured holds in the subject matter of the insurance. The principle of insurable interest requires that, in personal insurance, the policyholder must have an insurable interest in the insured at the time of contract formation – in property insurance, the insured must have an insurable interest in the insured subject matter at the time of the occurrence of the insured event. This principle is designed to prevent moral hazard and wagering on insurance.

Utmost Good Faith Principle

Also known as the principle of uberrimae fidei, this principle requires both parties to the insurance contract to act honestly and disclose all material facts in the process of contract formation and performance. Neither party shall misrepresent or conceal material information.

Indemnity Principle

This principle applies only to property insurance and not to life insurance. It means that, in the event of a covered loss, the insurer is obligated to indemnify the insured for the actual loss sustained – within the scope of the insured amount ‒ and the insured is not entitled to profit from the insurance.

Proximate Cause Principle

The insurer is liable only when the proximate cause of the loss falls within the scope of insured risks. Proximate cause refers to the most direct, dominant and effective cause that leads to the occurrence of the insured loss, among a chain of contributing factors.

In China, insurers have the following rights concerning the presentation of the risk prior to the inception of the insurance policy.

• The right to require disclosure of material facts – prior to the conclusion of the insurance contract, the insurer has the right to enquire about relevant information concerning the insured or the subject matter of insurance. The applicant (policyholder) is obligated to make truthful disclosures in response to such enquiries.
• The right to refuse coverage or rescind the contract – if the applicant intentionally or owing to gross negligence fails to fulfil the duty of disclosure, and such failure is sufficient to affect the insurer’s decision to underwrite the risk or determine the premium rate, the insurer has the right to rescind the insurance contract.
• The right to assess risk and determine premiums – based on the risk-related information provided by the applicant, the insurer has the right to determine whether to accept the risk, under what terms to provide coverage, and how to set the premium rate, sum insured, and the scope of coverage.

Surge in Liability Insurance Litigation

Courts are seeing a marked uptick in claims under professional liability, public liability and product liability policies. The growth tracks the rapid penetration of liability products as Chinese corporates become more risk-aware, but it has also produced a corresponding rise in coverage fights – especially over policy triggers, aggregate limits and the scope of “business activities” clauses.

Fire Insurance Disputes Climb Alongside e-Commerce Logistics

China’s booming online retail and warehousing sector has driven more property insurance placements. A spate of warehouse fires has triggered a wave of fire insurance claims and ensuing litigation, centring on questions of under-insurance, adequacy of risk disclosures, and whether standard fire exclusions for certain stored goods apply.

Personal Accident Claims From the “New Employment” Workforce

Driven by government requirements to protect gig economy workers, platform companies have rolled out group personal accident and term life schemes for delivery riders, ride-hail drivers and other freelancers. The volume of bodily injury and death benefit claims under these programmes has jumped, leading to disputes over the definition of “work-related” accidents, territorial limits, and the interplay between statutory compensation and private insurance.

Insurance coverage disputes are generally resolved via the following methods in China.

• Negotiation ‒ in the event of a dispute over insurance coverage between the insurer and the insured or beneficiary, the parties will typically first attempt to resolve the matter through negotiation. This is generally the most cost-effective and efficient method, and many disputes are resolved during the negotiation stage.
• Arbitration ‒ where the insurance contract contains a valid arbitration clause, the parties are required to submit the dispute to the designated arbitral institution in accordance with the agreed terms. Arbitration is characterised by its finality and confidentiality and is well-suited to disputes involving technical or commercial complexity.
• Litigation ‒ if the parties fail to reach an agreement through negotiation or mediation and no valid arbitration clause exists, the dispute may be brought before a competent court. Litigation tends to be more time-consuming.

Resolution of Reinsurance Disputes

Reinsurance contracts often involve international reinsurers and high-value claims and, as such, their dispute resolution mechanisms tend to be more international in nature. In practice, reinsurance agreements frequently provide for the application of foreign laws (such as English or Singapore law) and resolution through international arbitration. Commonly selected arbitral institutions include the LCIA, the Singapore International Arbitration Centre (SIAC), and the Hong Kong International Arbitration Centre (HKIAC). Reinsurance disputes are generally more complex, both legally and procedurally, and require a higher degree of specialisation and cross-border legal expertise compared to direct insurance disputes.

In China, although the law does not distinguish between consumer insurance contracts and commercial insurance contracts, when the insured party is regarded as a consumer, their legal position differs significantly from that of professional parties in insurance contracts. The key differences are as follows.

• Contract interpretation favours the consumer – any ambiguity in the standard terms of insurance contracts must be interpreted against the insurer and in favour of the consumer.
• Stricter disclosure obligations for exclusion clauses – Article 17 of the Insurance Law requires insurers to highlight exclusion clauses conspicuously and to explain them clearly to the consumer. Failure to do so renders the clause unenforceable.
• Dispute resolution mechanisms favour consumers – consumers may file complaints with financial regulators (eg, the NFRA), which often take proactive measures to protect consumer rights. Consumer protection rules may also apply in litigation.

Therefore, insured parties identified as consumers enjoy a higher level of legal protection under Chinese law.

Under Chinese law, a third party may – in certain circumstances – enforce an insurance contract or bring a claim against the insurer. The main scenarios include the following.

• Named beneficiaries in life insurance contracts – in life insurance contracts where a beneficiary is expressly designated, the beneficiary may claim the insurance proceeds directly from the insurer after the occurrence of the insured event.

• Direct action by third parties in liability insurance ‒ according to Article 65 of the Insurance Law, in liability insurance, if the insured causes damage to a third party, the insurer may directly compensate the third party in accordance with the law or the contract. Once the insured’s liability to the third party is established, the insurer must directly compensate the third party at the insured’s request. If the insured fails to make such a request, the third party may directly claim compensation from the insurer for the amount they are entitled to.

• Assignment of insurance proceeds to third parties ‒ in commercial transactions, if the right to claim insurance proceeds is lawfully assigned to a third party (such as a mortgagee or a financing party), that third party may enforce the assigned rights against the insurer and claim the insurance proceeds directly.

In Chinese judicial practice, “bad faith” refers to a situation where a party harms the legitimate interests of others intentionally or owing to gross negligence. This concept is reflected across various areas of law, including civil law and insurance law, as follows.

Bad Faith Under the Civil Code

The Civil Code contains multiple provisions that explicitly address and regulate acts conducted in bad faith, including but not limited to the following.

• Collusion between parties ‒ where a party colludes with the counterparty in bad faith to infringe upon the lawful rights and interests of others, the resulting civil legal act will be deemed invalid.
• Bad faith agency ‒ where an agent colludes with the counterparty in bad faith to harm the interests of the principal, both the agent and the counterparty will bear joint and several liability.
• Bad faith possession ‒ where a possessor causes damage to immovable or movable property during possession, and the possession is in bad faith, the possessor will be liable for damages.

Bad Faith Under the Insurance Law

The Insurance Law addresses acts conducted in bad faith both by the policyholder and by the insurer, as follows.

Bad faith on the part of the policyholder

According to the Insurance Law, if a policyholder intentionally or owing to gross negligence fails to fulfil the duty of disclosure, and such omission is sufficient to affect the insurer’s decision on whether to underwrite the risk or adjust the premium rate, the insurer is entitled to rescind the contract. If the policyholder intentionally breaches the duty of disclosure, the insurer will not be liable for any insurance accident occurring before the rescission of the contract, and the paid premium will not be refunded.

Bad faith on the part of the insurer

Although the Insurance Law does not explicitly use the term “bad faith” to regulate insurers’ conduct, under the general principle of good faith and relevant judicial practice, an insurer that unreasonably delays or refuses to pay a claim may be deemed in breach of contract.

If an insurer delays the payment of a claim, it may be subject to the following legal liabilities and regulatory penalties.

• Civil liability ‒ if the insurer fails to conduct a timely assessment or fails to fulfil its obligation to pay compensation or insurance benefits after receiving a claim from the insured or beneficiary, it must not only pay the insurance proceeds but also compensate the insured or beneficiary for any actual losses suffered as a result.

• Regulatory penalties ‒ if an insurer refuses to fulfil its contractual obligation to pay compensation or insurance benefits in accordance with the law, the NFRA has the power to order rectification and may impose a fine ranging from RMB50,000 to RMB300,000. In serious cases, the regulator may impose additional measures, such as restricting the insurer’s business scope, ordering a suspension of new business, or even revoking the insurer’s business licence.

Under Chinese law, whether an insured is bound by the representations of its insurance broker depends primarily on whether the broker had valid authority and whether the act in question was carried out within the scope of such authority. In determining whether such legal effect arises, courts will take into account factors such as the source and scope of the broker’s authority, the insured’s fault or acquiescence, and the insurer’s duty to verify the existence of the agency relationship.

In China, delegated underwriting and claims handling arrangements are common in the insurance industry, particularly in collaborations between insurers and insurance agents, brokers, or third-party service providers. These arrangements are typically based on contractual agreements and aim to enhance operational efficiency and expand service coverage.

Despite their prevalence in practice, such arrangements may give rise to legal disputes in certain circumstances – for example, when the delegated party acts beyond its authorised scope, provides substandard services, fails to adequately disclose information, or lacks proper licensing qualifications. In judicial practice, courts usually assess these cases by examining factors such as the scope of delegated authority, the insured’s reasonable reliance, and the insurer’s duty of oversight and internal control.

In recent years, regulatory authorities have strengthened supervision over intermediary cooperation and third-party outsourcing. Insurers are encouraged to establish robust compliance systems and enhance transparency to mitigate the risk of disputes arising from delegated authority arrangements.

In China, claims where insurers fund the defence of insureds most commonly arise in liability insurance lines, particularly product liability insurance, professional indemnity insurance, etc. Article 66 of the Insurance Law sets out a clear principle in respect of liability insurance : unless otherwise agreed, the insurer shall bear the arbitration or litigation expenses and other necessary and reasonable expenses paid by the insured party.

However, whether the attorney’s fees fall within the scope of necessary and reasonable expenses the insurer must bear ‒ as stipulated in Article 66 of the Insurance Law ‒ has long been a subject of contention between insurers and insureds, both in contractual drafting and judicial interpretation. Whether the insurer is obligated to fund the defence (and to what extent) depends on the policy wording, statutory interpretation under Article 66 of the Insurance Law, and the court’s assessment of the enforceability of relevant exclusion clauses.

In the coming years, the rules governing the insurer’s obligation to fund defence costs are expected to become more standardised and increasingly favourable to insureds. The main reasons for this trend are as follows.

• Stricter regulatory oversight ‒ regulatory authorities have been emphasising the insurer’s duty to adequately disclose and explain exclusion clauses, thereby restricting the excessive use of defence cost exclusions.
• Judicial tendency to protect insureds ‒ courts in China are increasingly inclined to support the reimbursement of reasonable defence-related expenses, such as legal and appraisal fees, even where policy exclusions exist.
• Market and client-driven demands ‒ corporate insureds are placing greater emphasis on securing defence cost coverage, prompting insurers to revise and refine their product offerings accordingly.
• Influence of international practices and cross-border litigation ‒ in cross-border product liability insurance or cases involving foreign insureds, policyholders often expect protection aligned with the “duty to defend” model commonly seen in common law jurisdictions. As China continues to engage in international legal co-operation, the domestic insurance market may gradually align its policy design with global standards.

In recent years, litigation in China concerning whether insurers are liable for insureds’ defence costs has shown a clear trend of increasing in both cost and complexity. This trend is driven by the following key factors.

• Refined judicial standards and fee categorisation ‒ courts are increasingly inclined to classify legal fees, appraisal fees, and other costs into distinct categories for separate evaluation, making the litigation process more complex.
• Rising claim amounts by insureds ‒ as liability insurance coverage expands, insureds (particularly corporate policyholders) are asserting higher amounts for defence-related expenses.
• Inconsistent judicial interpretations ‒ courts in different jurisdictions continue to apply varying standards when assessing the validity of defence cost exclusions and the insurer’s duty to disclose such clauses, leading to unpredictability in outcomes.

However, with regulators emphasising clause transparency and the insurer’s duty to provide adequate notice, and with growing market demand for defence cost coverage, such disputes may gradually decrease. As a result, the upwards trend in cost and complexity may level off within the next five years.

In China, claimants generally cannot obtain commercial insurance coverage to specifically protect against the costs risks associated with litigation, as the Chinese legal system has not yet widely adopted litigation costs insurance schemes similar to those in the UK and other jurisdictions.

Under Chinese law, where a third party causes damage to the insured subject matter resulting in an insured loss, the insurer ‒ upon payment of insurance proceeds to the insured ‒ is subrogated to the insured’s right to claim compensation from the third party, up to the amount of the indemnity paid.

The insurer’s right to pursue third parties is set out in Article 60 of the Insurance Law. The insurer is entitled to bring a subrogation claim in its own name.

In recent years, major events such as the COVID-19 pandemic and the war between Russia and Ukraine have had a significant impact on the volume and type of litigation in China, particularly with regard to insurance-related disputes. The main developments in this respect are as follows.

Impact of COVID-19 Pandemic

Insurance-related litigation has been affected by the pandemic in the following ways.

• Increase in property insurance claims and business interruption insurance claims ‒ many businesses filed claims due to shutdowns or interruptions during the pandemic, raising disputes over whether infectious disease constitutes an insured peril. Courts have been divided on the issue, with some holding it to fall within exclusion clauses, whereas others have favoured the interests of the insured.
• Disputes under health and accident insurance policies ‒ a rise in claims has been seen where insureds died from or were severely affected by COVID-19, entailing debates over the scope of coverage and the definition of illness.
• Rise in contract interpretation disputes ‒ issues such as whether the pandemic constitutes a “material change” or “force majeure”, and whether insurers may deny coverage or terminate policies on that basis, have been increasingly litigated.

Impact of War in Ukraine

The consequences of Russia’s invasion of Ukraine have affected insurance-related in the following ways.

• Increase in marine and cargo insurance claims ‒ with rising geopolitical risks, especially in cross-border trade and transport, claimants have filed for losses arising from delays, damage, or detention of goods. These claims often involve the interpretation of war exclusions or force majeure clauses.
• Disputes in aviation insurance and reinsurance ‒ some Chinese aircraft lessors leased aircraft to Russian lessees who have refused to return the aircraft owing to sanctions and the ongoing conflict, giving rise to significant claims under all-risks insurance policies and war-risk insurance policies.

Given that the COVID-19 pandemic is now over, the number of related insurance litigations is expected to decrease during the next 12 months. Meanwhile, disputes arising from the Russia–Ukraine conflict are likely to continue, particularly in the areas of marine insurance, aviation insurance, and reinsurance.

Factors such as the COVID-19 pandemic, the Russia–Ukraine conflict, and China–USA trade tensions have indeed given rise to a number of significant insurance coverage issues and judicial test cases in recent years. These developments have had a substantial impact on insurance practice and legal adjudication, particularly in the area of contractual liability and coverage interpretation.

Insurance Coverage Disputes Caused by COVID-19

Taking the COVID-19 pandemic as an example, a large number of contractual disputes emerged due to the pandemic itself or the associated containment measures. In response, the Supreme People’s Court issued authoritative guidance, clarifying how such cases should be handled.

Unless otherwise agreed by the parties, courts should comprehensively consider the varying effects of the pandemic across different regions, industries, and case types. A key focus is determining the causal relationship and the degree of impact between the pandemic (or related control measures) and the failure to perform contractual obligations. The Supreme People’s Court provides the following guidance in this regard.

Failure to perform contractual obligations

Where the pandemic or its control measures directly result in non-performance of contractual obligations, courts may apply the doctrine of force majeure to partially or fully exempt a party from liability, depending on the extent of the impact. However, if a party contributes to the non-performance or aggravates the loss, the party will remain liable to that extent. A party claiming force majeure must also bear the burden of proving that they fulfilled their duty to provide timely notice.

Difficulty in performing contractual obligations

Where the pandemic only makes it difficult to perform contractual obligations, the parties are encouraged to renegotiate. Courts should facilitate mediation and support continued performance where feasible. Claims for the termination of a contract merely due to hardship will generally not be upheld.

However, if the obligation to perform becomes manifestly unfair on one party, the court may support adjustments to performance terms (eg, deadline, method, or price). Once a contract has been legally modified, further claims for liability exemption will not be supported. If the pandemic renders the contract’s purpose unachievable, a termination claim will be upheld.

Factors such as the COVID-19 pandemic, China–USA trade tensions, and the Russia–Ukraine conflict have significantly affected both the scope of insurance coverage available and insurers’ risk appetites. On the one hand, insurers have generally tightened coverage in response to events such as pandemics and wars – for example, by introducing exclusions related to infectious diseases or the risk of war.

On the other hand, insurers have become more cautious in underwriting risks in high-risk industries and regions. In many cases, premiums have increased, deductibles have been raised, and coverage is now subject to more stringent terms and claims conditions.

In recent years, ESG factors have played an increasingly important role in China’s insurance industry, progressively influencing both underwriting and claims practices.

In underwriting, insurers have placed greater emphasis on identifying and managing environmental and social risks. By way of example, in the renewable energy, green construction, and ecological protection sectors, insurers have developed innovative products such as green insurance and carbon sink insurance. On the asset side, insurers have scaled up green investments, aligning underwriting with sustainable finance. ESG scores are also being adopted as reference criteria for underwriting and pricing decisions, thereby encouraging insureds to improve their ESG performance.

In claims handling and dispute resolution, ESG considerations are becoming relevant to determining the scope of coverage. In liability cases involving environmental pollution or labour issues, courts and arbitration bodies may assess whether the insured fulfilled their environmental or social obligations, which in turn may impact the insurer’s indemnity obligations and settlement terms.

Overall, insurers are not only implementers of ESG principles but also key enablers of ESG adoption across the economy. As regulatory frameworks evolve, ESG considerations are expected to exert a lasting impact on risk assessment, product development, and claims resolution within the insurance sector.

In providing insurance services, insurers must process a substantial amount of personal information relating to policyholders, insureds, and beneficiaries. This data is not only voluminous but also spans the entire operational process, including underwriting, claims handling, and policy administration.

In the underwriting phase, insurers are required under the Personal Information Protection Law (PIPL) to strictly fulfil their duty of notification prior to processing personal data. They must ensure that the collection, storage and use of personal information complies with the law. Given that offline channels remain the dominant distribution method in China’s insurance sector, insurers must harmonise data-handling rules across both online and offline channels and clearly delineate the legal bases for data processing in scenarios where consent is not required (eg, compliance with statutory obligations).

In the context of litigation and dispute resolution, issues such as data breaches and misuse of personal information have increasingly emerged as central points of contention in insurance-related disputes. The PIPL significantly strengthens enforcement, including higher penalties for violations and the introduction of public interest litigation for mass infringements. As a result, insurers are required to enhance their internal data governance frameworks, improve authorisation protocols, and implement robust risk-control mechanisms.

Moreover, inconsistencies between the Insurance Law and the PIPL present ongoing compliance challenges. Key issues include the lack of clear upper limits on data retention periods, uncertainty regarding the scope of information to be shared in reinsurance transactions, and the absence of defined obligations for insurance agents to return or delete personal data after termination of engagement. As regulatory scrutiny intensifies, personal data protection will increasingly become a focal point in the compliance and legal risk-management strategies of insurance institutions.

According to the official website of the NFRA, a total of 28 insurance-related regulatory documents were issued in 2024. These include key rules such as the Regulatory Rating Measures for Life Insurance Companies, the Measures for the Exercise of Discretion in Administrative Penalties, the Guidelines on Promoting High-Quality Development of Green Insurance, the Anti-Insurance Fraud Measures, and the Implementation Opinions on Accelerating the Development of Shanghai as an International Reinsurance Centre. These developments are expected to significantly impact the scope of insurance coverage, the handling of insurance litigation, and the insurer’s obligation to fund defence costs.

By way of further example, in July 2025, the NFRA promulgated the Administrative Measures for the Suitability of Financial Institution Products (the “Suitability Measures”). Effective from 1 February 2026, the Suitability Measures emphasise the fulfilment of insurers’ obligations and the protection of the interests of the insured.

In addition, in May 2024, the General Office of the State Council issued its Annual Legislative Work Plan, which includes a proposal to submit the fifth amendment to the Insurance Law to the Standing Committee of the National People’s Congress for review. The amendment is intended to address key operational, regulatory and risk-resolution challenges currently faced by the insurance sector. It aims to fill regulatory gaps and provide a stronger legal framework to support the high-quality development of the insurance industry. Once enacted, this amendment may have material implications for insurance contract interpretation, the allocation of coverage, the insurer’s duty to defend, and the litigation landscape more broadly.