The Supreme People’s Court of the PRC issued the Interpretations of Certain Issues regarding the Applicability of the Insurance Law of the People’s Republic of China (Part I) (the Interpretations) on September 21, 2009, which became effective on October 1, 2009. The Interpretations provide clarifications for certain issues related to the applicability of the Insurance Law of the People’s Republic of China (the Insurance Law), which was amended on February 28, 2009 and became effective on October 1, 2009. The Interpretations address whether in certain circumstances insurance contracts which were formed before the Insurance Law came into effect shall be subject to the Insurance Law.

Specifically, the Interpretations provide guidance on whether insurance contracts which were formed before the Insurance Law came into effect shall be subject to the Insurance Law in the following situations:

The Insurance Law is applicable to disputes arising from insurance contracts formed after the effectiveness of the Insurance Law. Disputes arising from insurance contracts formed before the Insurance Law came into effect are subject to the then-effective law, provided that issues not stipulated under the then-effective Law shall be subject to the current Insurance Law. The validity of the insurance contract shall be determined by and subject to the law in effect at the time of the contract’s signing.

Contracts formed before the Insurance Law came into effect that would be considered invalid under the then-effective law but valid under the Insurance Law shall be subject to the current Insurance Law.

If a contract was formed before the Insurance Law came into effect, but the relevant acts (such as the transfer of the subject matter, accidents, claims and indemnity by subrogation) occurred after the effectiveness of the Insurance Law, the contact shall be subject to the Insurance Law. If a contract was formed before the Insurance Law came into effect, but following the effectiveness of the Insurance Law, the insurer would like to rescind the contract on the grounds that the insured did not fulfill his obligation of faithful disclosure or the age of the insured is not correct, then the contract shall be subject to the Insurance Law. For contracts formed before the Insurance Law came into effect, October 1, 2009 will be used as the date for calculation of the time period in the following situations: (1) The insurer received claims or requests for payment before the Insurance Law came into effect, but the contract is subject to the Insurance Law after its effectiveness in accordance with the 30-day requirement under Section 23 thereof; (2) The insurer knew before the Insurance Law came into effect the grounds for rescission of the contract and exercises his right for rescission after the effectiveness of the Insurance Law in accordance with Sections 16 and 32 thereof, subject to the 30-day requirement under Section 16; (3) After the effectiveness of the Insurance Law, the insurer exercises his right for rescission, which is subject to the two-year requirement under Section 16 thereof; and (4) The insurer received notice of transfer of the subject matter before the Insurance Law came into effect and, after the effectiveness of the Insurance Law, requests an increase in the premium on the grounds of the increased danger resulting from transfer of the subject matter, or for rescission of the contract, which is subject to the 30-day requirement under Section 49 thereof.

In cases in which the applicant files an appeal or seeks re-adjudication and where final adjudication was completed before the Insurance Law came into effect, such cases shall not be subject to the Insurance Law.