Particularly in the context of cargo transportation by air, freight forwarding companies sometimes act as carriers and sometimes merely as agents. As a recent case shows, if an insurer fails to identify the role that such companies performed in a given case, it may jeopardise its ability to exercise its right of subrogation.
The loss or damage of a cargo and a dispute over the insurance coverage gave rise to a case before Wuhan Maritime Court. The issues included the jurisdiction of the court (as opposed to the courts designated on the bills of lading), the right of subrogation and the carrier's liability.
The Shanghai High Court recently ruled on a case in which, among other things, the insurer disputed the insured's indication of no claim or loss under all bills of lading under the insurance proposal form's interpellation clauses. The insured was found to have been involved in numerous cases before the Shanghai Maritime Court, but it maintained that it was merely the agent of the relevant non-vessel-operating common carrier.
One of the most direct ways for a foreign insurance company to enter the Chinese insurance market is to establish a branch in China. However, there is a significant precondition: at least one representative office must have been established in China for at least two years. Foreign insurance institutions that choose this route must be aware of the criteria and prudential conditions involved.
The Ministry of Finance and the China Insurance Regulatory Commission have jointly published the long-awaited Relevant Accounting Rules on Insurance Contracts. The rules cover three main areas: the division of mixed insurance contracts, the evaluation of major risks and the calculation of insurance contract reserves.
Gross negligence is a familiar concept in insurance policies sold in the Chinese market, but the term is comparatively new to Chinese insurance legislation. An insurance dispute arising from the devastating fire at China Central Television in February 2009 highlights the difficulty in differentiating between 'gross negligence' and 'negligence' within the meaning of the Insurance Law.
In many high-value insurance cases, two key issues to consider are whether the applicant or policyholder has insurable interests in the object of the contract, and how the insurer applies its subrogation rights after compensation is paid to the insured parties. A recent case illustrates the questions that are likely to arise.
Industry experts expect the China Insurance Regulatory Commission to announce keenly awaited rules on private equity investment by insurance companies. Large insurance companies in particular will be considering the example of the Ping An Group as a possible model for building a financial platform for private equity investment.
The rapid development of the market and the trend towards financial deregulation have encouraged foreign financial institutions to seek to invest in Chinese insurance companies. However, a would-be investor must understand the China Insurance Regulatory Commission regulations that apply to a foreign insurance company's equity investment in a Chinese target.
Encouraged by the significant potential returns on offer in the Chinese insurance market, foreign insurers have sought to market their insurance products in China, but would-be market entrants should be aware of the barriers and potential legal risks for overseas companies. The legality of a purchase of a foreign life insurance policy is likely to depend on whether the insurance activities were undertaken in China.
Lawyers often face a particular problem when a foreign investor wishes to nominate personnel to positions in a Chinese insurance company in which they have invested. The China Insurance Regulatory Commission has issued explicit provisions on the qualification requirements that apply to certain positions in insurance institutions.
The National Tourism Administration and the China Insurance Regulatory Commission have promulgated for public comment the draft Administrative Measures for Liability Insurance of Travel Agencies, which provide that travel agencies legitimately established in mainland China should buy compulsory travel agency liability insurance.
China's insurance regulation system is fraught with misunderstandings for companies and lawyers from other jurisdictions, particularly if they assume that the China Insurance Regulatory Commission's powers are similar to those of foreign regulators, such as the US Securities and Exchange Commission. Understanding the main regulator's role and its power to intervene can help to avoid problems.
Directors' and officers' liability insurance is widely used throughout Europe and North America, but has so far proved less popular in China, largely due to China's imperfect system of directorial liability. However, the government's attitude is likely to encourage the further development and emergence of new insurance products.
Environmental impairment liability insurance is a new product in China. It has proved difficult to promote it extensively owing to a lack of regulation and the attitudes of enterprises, local government bodies and insurance companies. However, the government has a clear plan for its development and the market is set to expand.
A clearer and more practical Insurance Law has been well received by the industry, particularly by foreign insurance companies and joint ventures. The revised law softens the restrictions on the investment of insurance capital, gives the regulator greater power over the sector and adopts a number of conventions that are familiar in foreign insurance markets, such as the use of incontestable clauses.
Even many years after the promulgation of the Insurance Law, health insurance products were generally unavailable; however, the sector has developed rapidly since the reform of China's medical system began in 2000. The potential returns have prompted foreign interest in the fields of healthcare and health insurance.
The regulation of aviation passenger accident insurance in China originated in the Interim Provisions on Compensation for the Personal Injury of Domestic Aviation Transport Passengers in 1998. Since then, the China Insurance Regulatory Commission's supervision and management of aviation passenger accident insurance has developed in three stages.
A substantial portion of the recent growth in China's insurance market has been driven by investment from abroad. However, the regulatory environment surrounding Chinese insurance businesses is uninviting. In order to gauge prospective returns, potential investors must understand the obstacles for foreign-invested insurance companies.
For a wide variety of reasons, insureds, insurers, brokers, agents, loss adjusters and regulators have become dissatisfied with the existing regulatory position on insurance. Legislators recently published a draft of a much-revised Insurance Law, which aims to resolve these problems and provide judges with a transparent set of regulations which can be applied to the insurance market in the light of recent changes.