CHINA Law and Practice Contributed by: Fubin Xiang, Xinyi Zhang, Mengmeng Wei and Lanmengyuan Zhang, W&H Law Firm
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, particu- larly 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 accu- racy of the underlying data. 8. Emerging Risks 8.1 Market Overview of Emerging Risks 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 bounda- ries 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 cover- age teams have also become increasingly important. 8.2 Impact of ESG on Underwriting and Insurance Litigation ESG factors are gradually reshaping insurance underwriting and litigation across China. The Nation- al Financial Regulatory Administration has issued green‑finance and green‑insurance policies, which
clauses are being tested. After the invasion on 24 Feb- ruary 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 cov- ered even though it happened later. 7.4 Supply Chain and Systemic Loss Events Although war risks, loss of hire, supply-chain inter- ruption and pure delay have long been discussed in the international insurance market, recent geopolitical disruptions have increased the scale and concentra- tion of these losses when one geopolitical event dis- rupts a critical trade route or market. The 2026 Gulf conflict is a clear example. Disputes arose when ves- sels were not physically damaged but were delayed, rerouted or unable to trade; standard hull and machin- ery 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 accumu- lation 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 con- tractual wording remains particularly important. 7.5 Forward Outlook and Market Response Underwriting Approaches Insurers around the world will lean more heavily on satellite data, vessel tracking, and geopolitical data- bases 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 dec- linature. 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.
74 I NSURANCE L I T IGATI O N 2026
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