Chinese Insurance Regulatory Commission (CIRC) Issuing Major Revisions to the Law Governing Insurance in China.

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The Chinese Insurance Regulatory Commission (CIRC) is issuing major revisions to the law governing insurance in China.  These new revisions are meant to offer better protection to the insureds and reinforce controls on insurers.  The new laws are expected to go into effect on October 1, 2009. 

 

 

Many of the changes involve contract certainty, timeliness and claim handling.  For example, the insurers will now only be able to rescind policies for nondisclosure or misrepresentation 30 days from first learning of the breach.  Moreover, if the insurer is aware of any nondisclosure at the binding of the policy, that nondisclosure cannot be grounds for claim denial or policy recession.  Insurers will also be obligated to explain the terms and conditions of insurance contracts prior to binding, if the insurer’s standard form is used.  Insureds are “encouraged” to give prompt notice of a claim to the insurer and insurers are obligated to request data pertaining to the loss within 30 days.  Grounds for denial must be in writing.

 

In addition, CIRC supervision of insurers will increase in several ways.  CIRC will now more closely monitor insurers on the verge of insolvency, with the right to force insurers to add capital, restrict the scope of their business or modify the way profits or monies flow to both shareholders and managers.  Also the requirement that all permitted reinsurance must first be offered to reinsurers registered in China has been formally abolished.  As of October 1, 2009, there will be no restrictions on reinsurance of Chinese risks.  However, there is still a good deal of uncertainty surrounding the implementation of the new law and what terms and restrictions the final versions will contain.

 

By Sarah X. Fang

https://www.goldbergsegalla.com/attorneys/Fang.html