The most common insurance disputes in China arise from disagreements over the interpretation and scope of policy wording, especially concerning exclusion clauses and whether clear notice and explanation have been provided. Subrogation is also one of the most frequent causes of action in cargo insurance and property insurance. Disputes over causation, particularly regarding whether an insured risk is the proximate cause of a loss, are common in property and liability claims with multiple contributing factors.

These issues are not evenly distributed across the market. In terms of volume, motor and property insurance continue to account for the largest number of litigation cases, while product liability insurance and marine and cargo insurance lead to a disproportionately high number of complex, high-value disputes. In recent years, there has been an increase in disputes related to newer product types and incident types. Cyber and data breaches, new energy products, AI products, war and international sanctions are generating new fact patterns, and established issues of wording, causation, exclusions and claims handling need to be applied to these novel risks.

Policy wording is one of the principal contributors to insurance litigation in China. While a significant portion of the market uses standard terms drafted by insurers, Article 30 of the Insurance Law requires that disputed standard terms shall first be interpreted according to their ordinary meaning and, where two or more interpretations remain reasonably available, in favour of the insured or beneficiary.

The policy terms most often tested include definitions of the insured event, causation language, exclusions, notification and co-operation duties, sanctions clauses and aggregation wording. Conflicts between the main policy, schedules, endorsements and negotiated special clauses also give rise to disputes.

Dispute resolution strategies depend on the policy’s dispute resolution clause and the commercial interests of the parties. Formal proceedings are not usually the first step. Mediation and negotiated settlement can occur before proceedings or during litigation or arbitration, and Chinese courts and arbitral institutions actively encourage settlement. Policyholders in retail lines also frequently file regulatory complaints instead of or before suing.

Early settlement can significantly reduce expert, preservation and legal costs, but insurers must also consider consistency across a series of claims under the same insurance products and the risk of setting a bad claims-handling precedent. Litigation provides a structured court process and a right of appeal on the merits, but hearings and judgments are less private. Arbitration offers specialist arbitrators, procedural flexibility and confidentiality, but institutional and tribunal fees may be high, and an award is final on the merits.

For a purely domestic insurance or reinsurance contract, PRC law will govern, and mandatory PRC insurance and financial regulatory rules cannot be overridden by agreement.

For cross-border insurance or reinsurance contract, party autonomy is generally respected. In the absence of a governing law choice, China adopts the “closest connection” test. Under Article 41 of the PRC Law on the Application of Laws to Foreign-Related Civil Relations, in case of lack of agreement, the governing law would be the law of the habitual residence of the party whose performance is most characteristic of the contract, or the law with the closest connection to the contract. For example, when liability insurance policies are issued by Chinese insurers within the territory of China, even if the insured operates and the accident occurs abroad, in the absence of agreements, PRC laws shall be applied to insurance disputes as the governing law.

However, there are also exceptions. The “closest connection” test does not apply to legally mandated compulsory insurance. For example, cross-border compulsory motor vehicle traffic insurance mandatorily applies the law of the place where the accident occurs. In addition, where the application of foreign law would harm China’s public interests, PRC law must prevail.

Chinese courts generally respect written jurisdiction agreements. For domestic disputes, such agreements are valid only if statutory connection requirements are satisfied, and the agreement does not conflict with exclusive or hierarchical jurisdiction rules. For foreign-related civil disputes, the 2023 revision of the Civil Procedure Law, effective from 1 January 2024, permits parties to choose a PRC court in writing without the former “actual connection” requirement, but still subject to PRC exclusive jurisdiction rules. In practice, forum clauses are commonly used across all types of insurance policies, while disputes around forum clauses arise more frequently in property insurances rather than in life insurance.

Conflicts of Jurisdiction

Conflicts arise mainly through parallel proceedings. The Civil Procedure Law amendments effective from 1 January 2024 specified when a PRC court may stay proceedings and codified a discretionary forum non conveniens principle. This allows a Chinese court to decline jurisdiction where the dispute is more closely connected with, and more conveniently tried in, a foreign court, provided that no PRC exclusive jurisdiction or agreed jurisdiction is engaged. However, in practice Chinese courts are rather cautious when applying this principle.

Conflicts of Choice of Law

Once jurisdiction is established, the court applies China’s conflict-of-laws rules, as mentioned previously. Where foreign law applies but cannot be ascertained after the required process, PRC law is applied instead.

PRC law does not contain a general anti-suit or anti-arbitration injunction regime equivalent to that found in some common law jurisdictions. Instead, the ordinary response to proceedings brought in China in case of breach of a valid exclusive jurisdiction or arbitration clauses is for the court to decline to hear the dispute, provided that the objection is properly raised.

In practice, Chinese courts do have similar orders, called conduct preservation orders, under which Chinese courts have issued anti-suit orders and anti-anti-suit orders in practice. These orders can restrain a party from commencing or continuing proceedings abroad. Such practice began in the maritime courts and has since been extended to other disputes, such as intellectual property. However, this relief should not be treated as a routine remedy for enforcing every insurance forum clause. In an insurance or reinsurance dispute, the availability of such relief remains highly fact- and forum-specific.

Jurisdiction Issue in AI-Related Disputes

For AI-related disputes, the difficulty lies in locating and categorising the relevant conduct. A model may be trained in one jurisdiction on data drawn from several jurisdictions, while it is hosted in another jurisdiction and deployed to users in a third jurisdiction.

Under the Civil Procedure Law, jurisdiction over insurance disputes generally lies with the court of the defendant’s domicile or the place where the insured subject matter is located. If the place where the insurance contract is signed or performed, or the location of the insured subject matter, is in China and satisfies the statutory jurisdictional requirements, Chinese courts may have jurisdiction. That said, where AI liability spans multiple jurisdictions, the outcome may differ in the presence of a valid jurisdiction agreement or exclusive jurisdiction provisions. In such cases, Chinese courts may decline to accept the case or will need to determine jurisdiction on a case-by-case basis.

Choice-of-Law Issue in AI-Related Disputes

Even if the parties agree that foreign laws shall apply, China’s mandatory rules (such as the Personal Information Protection Law, the Data Security Law and other regulations regarding information security) shall still apply as long as such AI or data processing activities involve Chinese users or Chinese data. Foreign legal provisions cannot override or eliminate the applicability of Chinese regulatory requirements.

Courts will generally enforce arbitration provisions in insurance and reinsurance contracts, provided the arbitration agreement is valid. Under the revised Arbitration Law, which took effect on 1 March 2026, an arbitration agreement is invalid where the subject matter is not arbitrable, where it was concluded by a person without capacity or with limited capacity, or where one party coerced the other into concluding it. Where the arbitration matters or the institution are unspecified or unclear, the parties may cure the defect by supplementary agreement, failing which the agreement will be rendered invalid.

A party may apply to the Intermediate People’s Court at the respondent’s domicile or the location of its property to enforce a domestic arbitral award. Courts usually do not review the substantive correctness of an arbitration award. Under the current Arbitration Law and Civil Procedure Law, a respondent may also resist enforcement based on:

• demonstration of the absence of a valid arbitration agreement;
• the award exceeding the scope of the arbitration;
• procedural irregularities;
• forged evidence;
• concealment of key evidence by the other party;
• arbitrator misconduct; or
• a violation of public interests.

For arbitral awards issued in foreign jurisdictions, China acceded to the 1958 New York Convention in 1986, subject to the reciprocity and commercial reservations, and Chinese courts are obliged to recognise and enforce awards made in other contracting states. Applications for enforcement must be filed within two years from the last date for performance under the award with the Intermediate People’s Court at the respondent’s domicile or the location of its property. In practice, identifying enforceable assets within China remains the most common practical obstacle.

Use of Arbitration

Arbitration is commonly used in reinsurance, marine, aviation, energy, major property and other cross-border disputes, where parties value specialist decision-makers and the enforceability of awards.

However, even where policies specify arbitration, early settlement and negotiation remains the practical preference for international insurance disputes. This is because international arbitration raises complex issues around choice of law, foreign law regimes, jurisdiction and cross-border enforcement, which most parties generally wish to avoid. These disputes are therefore also often resolved through direct negotiations or, in complex cases, international mediation institutions.

Confidentiality of Arbitration

Arbitration hearings are generally non-public, and leading institutional rules normally impose confidentiality obligations on the institution, tribunal and participants. This makes arbitration attractive for sensitive coverage or reinsurance disputes.

Finality of Arbitration

Awards are final, and there is no appeal on the merits. A party may seek set-aside or resist enforcement only on limited statutory grounds, and the revised Arbitration Law has reduced the ordinary set-aside period to three months. Parties should therefore carefully address tribunal selection, evidence, expert issues and the precise scope of the arbitration clause at the beginning.

New Risks That Lead to New Disputes

Recent disputes have witnessed the emergence of new products and new risks. Cyber incidents, data breaches, AI operations, new-energy products and geopolitical sanctions are producing losses that were not always contemplated when policy wording was drafted.

Coverage Disputes Regarding Electronic Distribution

As more policies are now taken out electronically, disputes frequently arise over whether the insurer has fulfilled its obligation to provide clear notice and explanation of exclusion clauses through pop-ups, tick‑boxes or forced‑scroll mechanisms. To provide clear and traceable factual grounds for such disputes, China has further elaborated the “dual recording” requirement for both the online and onsite distribution of certain insurance products. This requires insurers to make an audio and visual record of the sales process, covering identity verification, an explanation of the product, disclosure of risk and the customer’s consent.

Regulatory Pressure Is Reshaping Dispute Positions

Nowadays, regulatory scrutiny has also tightened. The consumer protection supervisory assessment regime has imposed real costs for mis‑selling, unreasonable declinature and delayed payment, which has also placed insurers under greater pressure in coverage disputes. Insureds are correspondingly more inclined to attack the effectiveness of a clause than to argue its meaning, and to complain to the regulators, which often takes proactive steps to protect consumer rights.

Interpretation of Ambiguity

Generally, courts interpret policy wording under the Civil Code principles applicable to all contracts, considering the ordinary meaning of the words used, the relevant clauses, the purpose of the contract, transaction practices and the principle of good faith. If any ambiguity remains after such interpretation process and two or more meanings are reasonably available, Article 30 of the Insurance Law requests that the court or tribunal adopt the interpretation favourable to the insured or beneficiary, provided that such ambiguity stems from standard clauses. This is similar to the concept of the contra proferentem rule in common law.

Interpretation of Exclusion Clauses

According to Article 17 of the Insurance Law and a reply from the Supreme People’s Court, the insurer must draw the policyholder’s attention to the standard-form exclusion clause in words, fonts, symbols or other obvious signs, and must clearly explain its content when the contract is made. Failure to meet such obligation would render the clause ineffective. In addition, such requirements do not extend to exclusion clauses that were specially negotiated rather than being in standard form.

Interpretation of Endorsements

Endorsements and other specially negotiated clauses are generally treated as part of the contract. Where there are inconsistencies between endorsements and standard clauses, endorsements shall prevail.

Cyber claims in China are generating disputes over whether ransomware, data theft, system interruption, vendor failure and privacy liability fall within the insured event, and whether business interruption, regulatory investigations, third-party liability or ransom-related payments are covered. Systemic events create additional questions where one cloud, software or infrastructure failure affects many insureds.

The Cybersecurity Technology—Guidelines for Application of Cybersecurity Insurance (GB/T 45576-2025), effective from 1 November 2025, now provides a recommended national standard for covered events, losses, risk assessment and claims handling. Publicly available policy wordings also show a trend towards more clearly defined coverage triggers, aggregation rules and exclusions for systemic risks, technology failures and regulatory liabilities.

Aggregation disputes are becoming more visible in large property, liability, catastrophe and technology claims. A typhoon, flood, defective product, common software vulnerability, cloud outage or repeated misconduct can generate multiple losses across sites, claimants or policy periods. The dispute lies in whether those losses aggregate into one deductible and one limit or remain separate losses.

Published PRC insurance cases have not yet developed a single detailed test comparable to some mature common law markets. The result therefore depends heavily on the wording used. For example, a court would interpret “occurrence”, “event”, “accident”, “cause”, “series of related acts” or similar language under the general contract rules and Article 30 of the Insurance Law as ambiguous standard terms.

Sanctions

A sanctions limitation or exclusion clause may relieve the insurer of the obligation to indemnify. However, its enforceability must now be tested against the Anti-Foreign Sanctions Law, which allows a Chinese party harmed by another party’s implementation of foreign discriminatory restrictive measures to sue in a PRC court for cessation of the infringement and damages. Therefore, an insurer that simply imports a foreign unilateral sanctions clause and declines coverage on that basis runs a considerable risk. Where the underlying sanction is found to constitute improper extraterritorial jurisdiction, the clause may be held ineffective, and the insurer may itself incur liability.

Illegality

In case of life insurance, the insurer is not liable where the loss results from the insured’s intentional commission of a crime or from resistance to criminal compulsory measures. However, not every unlawful act on the part of the insured automatically excuses the insurer from liability. In property and liability insurance, courts generally give this exclusion a restrictive interpretation, holding that minor breaches, such as ordinary traffic offences, do not justify a denial of coverage unless the breach directly caused the loss and was expressly listed in the exclusion clause.

Public Policy Considerations

A contract that offends public order and good morals, or that threatens financial security, may be held void from the beginning. Where a policy is used to conceal a crime, or a fake insured object is created in order to obtain credit fraudulently, the courts may set the contract aside under Article 153 of the Civil Code. The insurer is then under no obligation to indemnify, and any premium already received may be recoverable.

Under the Insurance Law in China, insurers must assess claims promptly. In complex cases, they are required to complete the assessment within 30 days unless the policy provides otherwise. The insured must be notified of the outcome, and where the claim falls within cover, payment is to be made within ten days of an agreement on the amount.

Where the claim is declined, a notice with reasons needs to be served within three days of the determination. Where the final amount cannot be determined within 60 days after receipt of the claim and supporting materials, the insurer must pay the amount that can be ascertained based on the evidence available. Unjustified delay may expose the insurer to liability for losses caused by the delay.

The supervisory assessment regime for consumer protection puts more pressure on insurers. Insurers are graded on different levels, and the grade determines the intensity of supervision. Where improper claims handling is identified, the insurer can expect a risk warning letter, an order to rectify within a fixed period and a requirement of internal accountability, with public disclosure where the regulator considers it warranted.

Failure to remedy the position may result in restrictions on launching a new business and opening new branches. The measures now require the result to be reported to the board and senior management, which has moved claims handling from a departmental concern to a governance issue.

ESG-Related Coverage

ESG considerations have played a more important role in coverage dispute analysis. For example, where a liability claim arises out of pollution, ecological damage or an employment matter, a court or tribunal will look at how the insured conducted itself, and in particular whether it held the necessary permits, met the applicable discharge or safety standards and met its reporting obligations. Non‑compliance with ESG obligations may trigger an exclusion of unlawful conduct, which may give the insurer a strong coverage defence.

Climate-Related Coverage

Extreme weather has made catastrophe, property, business interruption and agricultural cover the most exposed lines. Disputes in this area typically concern:

• the causal relationship between the weather and a pre‑existing defect or inadequate maintenance;
• the scope of flood, storm and pollution exclusions;
• the operation of deductibles and sub‑limits; and
• whether a business interruption claim requires insured physical damage as its trigger.

Insurers are responding principally through policy design, tightening the definition of insured incidents and giving closer attention to sub‑limits, deductibles, waiting periods and aggregation clauses in order to control cumulative risks across a single weather event.

Delegated underwriting and claims handling raise a basic agency question regarding which act or representation is legally attributable to the insurer. An insurance agent acting within actual authority can bind the insurer, while Civil Code principles on apparent authority may also become relevant where the insurer’s conduct gave the policyholder reasonable grounds to believe authority existed.

Claims disputes become more complex where a third-party administrator gives an inconsistent coverage position, misses a claims-handling deadline, requests excessive documentation or settles beyond its authority. The issues are whether that conduct binds the insurer and whether it affects coverage, claims deadlines or the insurer’s ability to rely on policy defences.

Outsourcing does not remove the insurer’s own claims-handling obligations. The insurer may remain responsible to the insured for authorised or attributable conduct, while separately seeking damages against the delegate for exceeding authority, negligence or breach of the service agreement.

Financial lines disputes are developing alongside the revised Company Law, effective from 1 July 2024, which has increased the duties and potential liability of directors, supervisors and senior management and allowed shareholders of a parent company to sue the directors of its wholly owned subsidiaries. This has heightened focus on D&O insurance. Coverage disputes commonly concern:

• who qualifies as an insured person;
• what constitutes a wrongful act;
• when a claim is first made; notice and prior‑circumstance provisions;
• defence‑cost advancement; and
• the allocation of costs between covered and uncovered parties.

In addition, securities misstatement litigation, regulatory investigations, professional negligence claims and insolvency‑related actions are important sources of financial lines exposure. Recurring policy questions include whether fines or penalties are insurable, the scope of dishonesty or personal‑profit exclusions, related claims and the interaction between D&O cover and corporate indemnification.

Casualty claims nowadays increasingly involve new-energy products, automated equipment and complex supply chains – eg, lithium-ion battery incidents and construction or workplace accidents that caused bodily injury or property damage claims involving multiple contractors and indemnities. Coverage disputes of such casualty claims focus on occurrence and aggregation, whether the loss arose from a defective product or from the insured’s own work, territorial scope, limits and deductibles.

Claims against insureds that commonly require a funded or reimbursed defence arise under product liability, public and employers’ liability, professional indemnity, D&O, construction liability and other commercial liability covers. For liability claims, under Article 66 of the Insurance Law, unless the policy otherwise provides, the insurer shall bear the arbitration or litigation costs incurred by the insured, as well as other necessary and reasonable expenses. In practice, expenditure is heaviest in D&O and product claims, which tend to run for extended periods and might require expert examination.

However, the precise scope of “necessary and reasonable expenses” has long been disputed. Insureds and insurers might encounter disagreements in whether attorney fees and other legal fees fall within the coverage. In practice, the outcome relies on multiple factors:

• the specific wording of the policy;
• the court’s interpretation of Article 66 in light of the facts; and
• the validity of any clause excluding attorney fees and other legal fees.

An express exclusion will generally relieve the insurer of liability for such fees, but only if it satisfies the statutory requirements for standard‑form clauses.

Technology and regulatory change are broadening the types of claims brought against insureds. Data misuse, cyber incidents, algorithmic decisions, failures of automated systems and new energy products can give rise to contract, tort, product, privacy and regulatory proceedings at the same time.

Insurers are becoming involved earlier where one event can trigger parallel civil, administrative and reputational issues. Early involvement helps preserve technical evidence, co-ordinate experts and avoid admissions or settlements that may prejudice coverage. It also creates more difficult allocation questions, since different allegations may fall under different cyber, D&O, professional indemnity, product liability or property policies, and some regulatory penalties or intentional conduct may be excluded even where related defence costs are potentially covered.

Complex claims may involve multiple defendants, experts, jurisdictions and bodies of law. Cross-border product liability, aviation, marine, D&O and professional negligence disputes can require foreign counsel, technical experts, translation, overseas evidence collection and parallel regulatory work. These costs can become substantial before the insured’s liability or the insurer’s ultimate indemnity obligation is resolved.

The main disputes concern whether particular legal, expert or investigation fees are “necessary and reasonable” under Article 66, whether the policy validly modifies the statutory default and whether the insured obtained any required consent before incurring costs or settling. In practice, clear defence cost wording, budgets, regular reporting and early reservation-of-rights positions are increasingly important in controlling both cost and later coverage litigation.

In China, there are few insurance products that cover litigation cost risks. In practice, such risks are more often managed through the policy wording with express defence-cost cover, contractual indemnities, fee caps and budgeting, or settlement and mediation. Court fees are generally allocated by the court, commonly against the unsuccessful party, but each side usually bears its own attorney fees unless a contract, statute or other legal basis permits recovery.

In addition, China does not currently have a comprehensive statutory regime for third-party litigation funding comparable to some common-law jurisdictions. Funding arrangements therefore remain relatively uncommon and may raise questions about confidentiality, attorneys’ professional duties, control of proceedings and enforceability of the funding agreement. They are more visible in some international arbitration and commercial contexts than in ordinary domestic insurance litigation.

There is not yet any market feedback to the effect that AI-generated or AI-assisted claims have materially increased insurance claim volumes in China. The practical risk is nevertheless real. Generative tools could make it easier to produce large numbers of demand letters, complaints and submissions. A more difficult problem lies in AI-generated or manipulated evidence, including altered photographs, documents, audio or video. Existing evidentiary and insurance-fraud rules still apply, but authentication may require further review and preservation of metadata.

Insurers are also trying to use AI in claims handling. In response, the National Financial Regulatory Administration released AI guidance in June 2026, emphasising governance, risk management and human oversight from insurers and warning that overreliance on automated decisions can itself create complaint, regulatory and litigation risk.

In liability insurance disputes, once the insured’s liability to the third party has been determined, the insurer must pay the third party directly at the insured’s request. If the insured fails to make that request, the third party may claim directly against the insurer for the amount it is entitled to receive. Meanwhile, in compulsory traffic insurance, the third party may list the insurer as a co-defendant without the prerequisite that the insured delays in making a request.

In cases of oil pollution from ships, the victim may bring a direct claim against the ship-owner’s liability insurer or financial guarantor under the special rules of Maritime Law. The Civil Aviation Law, by contrast, permits a direct action against the operator’s insurer or guarantor only where the coverage remains in force or the operator has become bankrupt.

Outside liability insurance, the doctrine of privity of contract generally prevents third parties from suing the insurer directly under the policy. Third parties usually need to assert their rights through the insured, unless otherwise provided by law or explicitly stipulated in the contract that the third party has a direct claim right against the insurer.

Regulatory Scrutiny of the Insured

Product recalls, data and personal information enforcement, workplace safety investigations and securities enforcement now routinely run in parallel with insurance claims. Considering that findings emerging during the regulatory process are difficult to challenge later, the defence of the insurance claim must be co-ordinated with the response to the regulator from the outset.

Reputational Exposure

Reputational risks often cut against the insureds’ economic interest. An insured facing a consumer or personal injury claim may prefer to settle quickly and quietly, even where the defence is strong and the insurer’s consent-to-settle provisions become the point of friction. This tension is most intense where the insured is a listed company or a consumer-facing brand.

Co-ordination of Claimants

Securities representative actions, consumer claims brought by consumer associations and public interest litigation initiated by the procuratorate have made grouped claims viable, and claimants increasingly combine litigation with regulatory complaints and media pressure. Product liability, group personal accident and platform worker insurance are the most affected insurance product types.

Insurers’ Response

Insurers are responding by involving themselves earlier in disputes. In practice, insurers tend to appoint or approve a counsel at the beginning rather than reviewing costs afterwards. They also tend to participate in setting a defence strategy across related claims so that a concession in one does not compromise the rest, concentrating on the issues that determine the outcome of the entire group. Mediation is also frequently used to close cases before the costs of legal fees and expert evidence are incurred.

Geopolitical drivers have the most impact on marine, aviation, cargo, trade credit, political risk and reinsurance. The Russia-Ukraine conflict, instability affecting major shipping routes, export controls and US-China trade restrictions can affect physical assets, delivery obligations, creditworthiness and the legality or practicality of payments.

Instability in key shipping routes, especially in the Middle East has placed additional pressure on marine war risk and cargo lines. As a result, Chinese insureds, lessors, financiers and insurers are increasingly encountering claims where issues of insured loss, sanctions analysis and contractual performance are closely intertwined.

These geopolitical developments are increasing both the volume and the complexity of claims in the affected lines, and are prompting closer scrutiny of policy wording that was often drafted before the current geopolitical environment took shape. Coverage disputes concern war and confiscation exclusions, territorial limits, sanctions clauses, causation, aggregation, notice and the treatment of losses caused by delay or interrupted supply chains.

In 2026, the Supreme People’s Court published a maritime case expressly confirming the mandatory application of China’s Anti-Foreign Sanctions Law and rejecting reliance on foreign unilateral sanctions as a defence to contractual performance. This decision heightens the potential for tension between sanctions limitations used in international insurance programmes and mandatory PRC rules.

Beyond the substantive issues of coverage and illegality, evolving sanctions are creating practical difficulties in settling claims. In practice, Chinese banks operate strict sanctions compliance reviews driven by concerns over its liquidity in international transactions. However, under current PRC law, banks are unable to issue a refusal of payment based on foreign sanctions, unless such sanctions are explicitly recognised by China. Consequently, payments sometimes might be delayed or rejected without formal justification, which increases the risk that judgments or settlements will not be performed in time, thereby placing insurers and reinsurers in a difficult position.

Recent conflicts, including the war in Ukraine, instability in the Middle East and major cyber-attacks, have drawn more attention to war, terrorism and political risks. In the PRC market, these perils are excluded from the basic cover and bought back as additional covers. Since the insured assets are typically deployed abroad and the risk is reinsured internationally, Chinese insurers and insureds generally adopt wordings consistent with international practices.

In terms of aviation war risks, policies usually give the insurer seven days’ notice to cancel the war cover, after which it may be reinstated on revised premium and limits. This offers flexibility in war risk exclusions although timing is of the essence. The Russian aircraft leasing losses are a good example of how such clauses are being tested. After the invasion on 24 February 2022, some insurers served notices to withdraw cover for Russia and Belarus. The formal prohibition on removing aircraft came after the notice period. But during that period, the Russian aviation authority began restricting foreign‑leased aircraft in practice. This raised a key question of whether the excluded peril had taken hold before the war cover ended. In this case, the answer was yes. The loss remained covered even though it happened later.

Although war risks, loss of hire, supply-chain interruption and pure delay have long been discussed in the international insurance market, recent geopolitical disruptions have increased the scale and concentration of these losses when one geopolitical event disrupts a critical trade route or market. The 2026 Gulf conflict is a clear example. Disputes arose when vessels were not physically damaged but were delayed, rerouted or unable to trade; standard hull and machinery insurance does not necessarily respond to such non-damage delay. Cover for delay or extended loss of hire is available, including in the Chinese market, but it has to be bought specifically.

Geopolitical events also create systemic accumulation and aggregation issues because one conflict may affect multiple vessels, cargoes and supply chains simultaneously. Whether the resulting losses constitute one event or several occurrences depends principally on the aggregation wording and the factual connection between the losses. Chinese law has no developed standalone aggregation test, so the contractual wording remains particularly important.

Underwriting Approaches

Insurers around the world will lean more heavily on satellite data, vessel tracking, and geopolitical databases to price risks dynamically. Capacity for high‑risk waters such as the Red Sea and the Strait of Hormuz is likely to shrink, with higher deductibles or more declinature. Parametric insurance products are likely to reach the market faster for non‑damage losses such as delay, enabling insurers to pay out based on an objective index rather than proof of loss.

Policy Wordings

War risk clauses are expected to be defined with greater precision, which might expressly cover or exclude cyber-attacks and drone strikes. Sanctions clauses are likely to require more detailed disclosure of counterparties and beneficial ownership. Supply chain interruption cover might expand its triggers to include government prohibitions and port congestion.

Dispute Trends

Coverage disputes and interpretation of wording will remain the main issue. Whether delay, rerouting or detention falls within war risk cover will probably remain inconsistent across cases. Sanctions clauses are likely to give rise to their own disputes, particularly over whether transactions involving a sanctioned state are automatically excluded. Parametric products might be challenged on fairness, the appropriateness of the chosen index as a proxy for loss and the accuracy of the underlying data.

The most significant emerging risks for the Chinese insurance market are cyber and data security, extreme climate and catastrophe exposure and geopolitical disruption, as well as AI and automation used in claims handling. Since new losses usually test definitions, causation, exclusions, aggregation and the boundaries between policy lines, for insurers and insureds, this is shifting work upstream.

More attention should be paid to risk mapping, cyber and technology dependencies, supply chains, catastrophe modelling, data governance and policy architecture at the very beginning. After the insured incident occurs, early evidence preservation and co-ordination between technical, regulatory and coverage teams have also become increasingly important.

ESG factors are gradually reshaping insurance underwriting and litigation across China. The National Financial Regulatory Administration has issued green‑finance and green‑insurance policies, which encourage insurers to include environmental and climate factors into risk management, and to develop products supporting green industries and catastrophe resilience. Underwriters are therefore asking more detailed questions about pollution controls, transition plans, supply chains and governance where those matters are relevant to the insured risk.

For insureds, the growing ESG focus has led to greater litigation and regulatory exposure. D&O claims related to ESG disclosure and securities misstatement litigation have increased. Pressure from regulatory enforcement is growing. Claims involving vulnerable consumers or socially sensitive issues tend to generate public scrutiny. Greenwashing claims are also emerging over incorrect or incomplete ESG disclosures.

Overall, ESG factors are moving from the margins to the mainstream of insurance practice, and the trend will accelerate as regulations mature. Insurers need to adapt their underwriting, wording and claims handling accordingly.

The Personal Information Protection Law, Data Security Law and Cybersecurity Law materially affect insurers because underwriting and claims handling require large volumes of identity, financial and often sensitive health information. The proposed revision of the Insurance Law, released in September 2026, requires insurers to establish cybersecurity and data security management systems, fulfil cybersecurity protection obligations, regulate data processing activities and effectively respond to cybersecurity incidents.

The National Financial Regulatory Administration released the Measures for Data Security Management of Banking and Insurance Institutions, which add detailed requirements on data governance, classification and grading, security controls and risk assessment for activities such as outsourcing, sharing and transfer. Cybersecurity maturity is consequently becoming an underwriting factor as well as an internal compliance obligation for insurers.

The rules also may constrain the use of AI in claims handling, since automated processing of sensitive personal information requires a separate legal basis. And in litigation, the parties increasingly dispute what the insurer must disclose, with insurers resisting production on data protection grounds and policyholders potentially arguing that the objection is being used to withhold material evidence.

Data centres combine high insured values with dependence on electricity, cooling, networking and back-up systems. Fire, electrical failure, cooling malfunction, water damage, battery incidents, cyber-attack or utility interruption can cause both physical loss and service outages affecting many customers. The same event can therefore engage property, equipment breakdown, business interruption, and cyber and third-party liability covers – and create significant aggregation risk.

Relevant claims frequently require close technical analysis of whether physical damage occurred, the actual cause and duration of the outage, the adequacy of alternative capacity and the calculation of lost revenue. Where tenants or downstream customers claim service losses, contractual liability caps and indemnities in data centre agreements can also materially affect the insured’s liability and the insurer’s exposure.

In China, social media addiction and its related mental health impacts have not yet given rise to a new category of insurance claims. Although the issue has already prompted thousands of plaintiffs to file similar lawsuits in the United States, and has drawn public attention and legal debate in China, such risks are only now beginning to emerge. Furthermore, plaintiffs seeking to bring algorithmic addiction tort claims under Chinese law will face real difficulty in both establishing the substantive elements of liability and in meeting the procedural burden of proof.

Nuclear risk is a specialised and highly technical area of insurance. A rare event can cause massive property damage, business interruption and third-party liability. The China Nuclear Insurance Pool was established in 1999. In 2026, China has 62 nuclear power under operation and more under construction. These provide the domestic pool with the largest pipeline of new nuclear business in the world. Despite this, the market still relies heavily on international reinsurance, particularly for transferring risk outward and managing the total exposure.

The key questions for insurers and reinsurers include design risk, serial defects affecting multiple units, operational delays, accumulation of risk at a single site, the boundary between nuclear and non-nuclear liability, and whether sufficient capacity is available at all. There have been no publicly reported cases on nuclear insurance claims in China; thus, insurers need to be careful regarding the allocation of risks in contract and policy wordings.

Regulatory focus has widened beyond financial compliance to claims handling, sales conduct, consumer protection, ESG issues and cybersecurity. The regulators are paying more attention to delayed payments, unreasonable declinature and mis-selling. As a result, insurers have to streamline their claims handling processes, standardise policy wording and improve anti‑fraud systems. This aims to reduce the complaints and litigation that used to arise from unfair claims handling and lack of transparency. At the same time, the focus has shifted to social responsibility, data compliance and cybersecurity, and environmental exposure in underwriting carbon‑intensive industries. Failures in these areas carry regulatory penalties and reputational damage, and may also generate disputes with policyholders, investors and other stakeholders.

Overall, the regulatory regime is tightening the space for non‑compliant conduct and steering the industry towards a more transparent and stable direction. Although compliance costs are rising, the risk of systemic disputes might fall as a result.

The most significant anticipated reform is the revision of the PRC Insurance Law, which will be the first comprehensive revision since 2009. In September 2026, the National Financial Regulatory Administration released a draft for public comment, which has introduced a series of significant changes to the current insurance law. For example, the draft clarifies and expands insurers' duty of notice and explanation from traditional exclusion clauses to any clauses of significant interest that exclude or limit the insurers’ liability. As a result, insurers will need to exercise greater care in sales procedures.

The Law also introduces changes to the claims process for liability insurance. Where insurance liability and joint liability arise together, the insurer shall compensate in accordance with the joint liability regime. Aside from these, significant adjustments have been made to insurance coverage, data security and regulatory supervision. These changes reflect a continued regulatory focus on protection of policyholders and enhanced insurer compliance obligations.