PRC Insurance Law Reform – Issue 1: Disclosure and Knowledge under Multi-Insured Policies

On 4 September 2026, the National Financial Regulatory Administration published the draft revised Insurance Law of the People’s Republic of China (the “Draft”)* for public consultation. The Draft comprises 214 articles across eight chapters and addresses insurance contracts, corporate governance, prudential regulation and risk resolution, among other matters. It has not entered into force.

Article 17, which corresponds to Article 16 of the existing Insurance Law, would extend the duty of disclosure from the “policyholder” to the “policyholder or insured”¹. It would also broaden the knowledge-based restriction on an insurer’s right to terminate for non-disclosure, extending the relevant standard at contract formation from actual knowledge to “knew or ought to have known”. This article considers the first proposal and its application to multi-insured policies. The test for and implications of an insurer’s actual or constructive knowledge will be addressed in the next article.

These proposals bear directly on the provision and review of underwriting information and the imputation of knowledge. They are of practical significance to D&O and financial institutions liability insurance, where a single policy may cover multiple insureds. Drawing on our UK team’s case commentary and our China team’s experience advising on coverage disputes, this article considers how bringing insureds within the statutory duty may affect the scope of disclosure, proposal documentation and the imputation of knowledge between insureds.

In a case commentary published on 9 November 2021, our UK team examined Berkshire Assets (West London) Ltd v AXA Insurance UK plc. When renewing its contractors’ all risks (CAR) and business interruption (BI) insurance, Berkshire failed to disclose that one of its directors had been charged with criminal offences in Malaysia. The development subsequently suffered an escape of water. AXA discovered the charges during its claims investigation and avoided Berkshire’s relevant cover and declined indemnity on the grounds that Berkshire had breached the duty of fair presentation under the Insurance Act 2015.

The Court upheld AXA’s position. Although the criminal charges arose from the director’s role at another company and were subsequently dropped, they were material at renewal because they could influence the judgement of a prudent insurer. AXA’s internal underwriting guidelines also established that, had the charges been disclosed, it would not have written the risk. The case illustrates that unproven allegations may themselves be material to underwriting. Their subsequent withdrawal does not retrospectively remove their significance for disclosure at placement.²

A Chinese D&O dispute illustrates another aspect of the issue. A judicial commentary published in Securities Law Review in 2017, entitled “The Duty of Disclosure and Related Issues in Listed Companies’ Directors’, Supervisors’ and Senior Executives’ Liability Insurance”, discussed a dispute between a US-listed Chinese company and its co-insurers. The company’s proposal questionnaire denied that mergers and acquisitions or financial restatements had occurred, although those matters were disclosed in other underwriting documents and written responses. When the company and its directors, supervisors and senior executives subsequently faced securities litigation in the United States, some co-insurers declined cover on grounds of non-disclosure.

According to the commentary, the Shanghai No. 2 Intermediate People’s Court held that, despite the inaccurate questionnaire responses, the true position had been communicated to the insurers through several channels. The insurers could have verified it at little cost but had failed to do so. The Court therefore found no breach of the duty of disclosure. It ordered the co-insurers that had declined cover to pay their respective shares of the insurance indemnity, together with interest. The sole appellant subsequently withdrew its appeal, and the first-instance judgment became final.³

The cases concern the English law duty of fair presentation and the PRC duty of disclosure respectively, and the applicable tests differ. They nevertheless highlight two issues: which facts require disclosure, and how compliance should be assessed by reference to the proposal questionnaire, supplementary responses and other underwriting materials. 

Who undertakes the duty of disclosure and imputation of knowledge in practice?

The corporate policyholder, the signatory and the insureds

These issues are particularly acute in the D&O context, where the policy is typically placed by the company but extends cover to the company and a potentially wide class of directors and officers, such that the policyholder, the person completing the proposal form, those holding the relevant risk information and the insureds seeking cover may all be different. 

Our team encountered this issue in a D&O matter as early as 2020. The front page of the proposal form identified only the company, but the declaration at the end stated that the signatory was authorised by the other “applicants” to complete it. The policy also used the term “insured” in its definition of the application. The documents did not clearly distinguish the policyholder from the insureds, giving rise to disputes as to who owed the duty of disclosure and the legal consequences of any breach.

In such cases, it is necessary to establish on whose behalf the signatory answered, whether the signatory was duly authorised, whether internal enquiries had been made and who held the specific risk information. Under the existing law, the policyholder owes the statutory duty of disclosure. Whether an insurer may terminate the contract or decline indemnity by reference to an individual insured’s representations or non-disclosure also requires consideration of the agency arrangements and the policy wording. The Draft would provide a more direct statutory basis for imposing the duty on insureds, while retaining the enquiry-based framework. Insurers should be able to identify the questions asked and the persons to whom they were addressed. A person’s status as an insured does not, of itself, establish that they received the relevant enquiries or knew of risks known to others. The existing judicial interpretation’s provisions on the scope and content of enquiries and the corresponding burden of proof also underline the need for clear proposal documentation.⁵

Berkshire is also instructive on the scope of disclosure. Where the insurer has made specific enquiries, a formal investigation or criminal charge may be material to underwriting even where no wrongdoing has been established. The individuals concerned should not omit the investigation or charge simply because they consider it unfounded. In a PRC law case, the content of the enquiries, actual knowledge and the effect of the fact on the underwriting decision must still be examined.

Severability and the imputation of knowledge for entity cover

Extending the duty to insureds does not mean that the knowledge of one or more insureds may automatically be imputed to the others.

In the matter handled by our team, the policy provided separate cover for each insured’s interests and stipulated that, as a general rule, one individual insured’s representations or knowledge were not to affect another individual’s cover. In our view, such severability and non-imputation provisions should continue to be given effect if the Draft is enacted. Insurers should consider each individual’s knowledge and cover separately. Non-disclosure by some insureds should not automatically exclude cover for the others.

Entity securities cover (Side C) raises a separate question of imputation. Where the policy limits the persons whose knowledge may affect entity cover to the chairman, CEO, CFO, board secretary or persons holding an “equivalent position”, that wording should be applied strictly. A broader definition of insured, encompassing other directors and senior executives, does not expand the class of persons whose knowledge may be imputed to the company. If there is an “equivalent position” under the policy, it requires consideration of the individual’s actual functions and authority. Whether a COO performs a role equivalent to that of the CEO, for example, depends on the specific delegation of authority and the functions actually discharged. Membership of senior management alone does not necessarily suffice. The analysis turns on the particular wording: D&O policies do not all adopt the same rules for imputing knowledge.

Conclusion

By bringing insureds within the statutory duty of disclosure, Article 17 of the Draft would reduce the scope for denying that duty solely on the ground that the relevant person is not the policyholder. This is particularly significant for D&O and financial institutions liability policies, where the named policyholder, the person completing the proposal, the individuals holding the risk information and those ultimately entitled to cover are often not the same.

The wider class of duty-holders would not, however, mean that one or more insureds’ knowledge or non-disclosure automatically prejudices the cover of others. The recipients of the enquiries, signing and agency arrangements, each insured’s knowledge and the policy’s severability and imputation provisions would still require separate examination. Where the policy imputes to the company only the knowledge of persons holding specified key positions for the purposes of entity cover, that restriction should be applied in accordance with the wording. It should not be broadened simply because the statutory duty extends to more persons.

For underwriting and claims handling, enactment of the Draft in its present form would place greater importance on proposal documentation and internal procedures. Proposal forms should identify, as clearly as possible, who answers on behalf of whom, what information requires confirmation by the relevant individuals and whether knowledge may be imputed between insureds. Following a claim, insurers should establish the information actually held by each relevant person at placement and assess the consequences of non-disclosure for the different sections of cover by reference to the policy wording.

This issue has focused on the implications for multi-insured policies of extending the duty of disclosure to insureds. The Draft also proposes to extend the standard for assessing an insurer’s knowledge at contract formation from “knew” to “knew or ought to have known”. This would have further implications for professional insurers’ review of underwriting materials, searches of publicly available information and follow-up enquiries. For insurers covering listed companies, this raises further practical questions about the relationship between public announcements, regulatory measures, information about investigations and proposal materials, and the point at which such information is sufficient to establish that an insurer “ought to have known”. These questions will be considered in the next issue.

*National Financial Regulatory Administration, Insurance Law of the People’s Republic of China (Draft Revision for Public Consultation) and Explanatory Notes (published for public consultation on 4 September 2026). References in this article to the “existing Insurance Law” are to the Insurance Law of the People’s Republic of China, as amended in 2015.

¹Article 16(1) of the existing Insurance Law stipulates: “Where, in connection with the conclusion of an insurance contract, the insurer makes enquiries about the subject matter of the insurance or the insured, the policyholder shall provide truthful information.” While Article 17(1) of the Draft reads: “Where, in connection with the conclusion of an insurance contract, the insurer makes enquiries about the subject matter of the insurance or the insured, the policyholder or insured shall provide truthful information.”

²Clyde & Co, “QBD Hands Down First English Insurance Act Judgment: Berkshire Assets (West London) Limited and AXA Insurance UK Plc (2021)”, 9 November 2021. Original article.

³Fu Wang and Zhu Yingqi, “The Duty of Disclosure and Related Issues in Listed Companies’ Directors’, Supervisors’ and Senior Executives’ Liability Insurance: Reflections on a Cross-Border Insurance Claim by a US-Listed Chinese Company”, Securities Law Review (2017), Vol. 20, pp. 279–293. The facts and outcome appear at pp. 280–284. The account in this article is based on the judges’ commentary, not on an independently obtained full judgment. Original article.

⁴Article 6 of the Supreme People’s Court’s Interpretation (II) on Several Issues Concerning the Application of the Insurance Law of the People’s Republic of China. Text published by the Supreme People’s Court.