On October 28, 2025, the 18th Session of the Standing Committee of the 14th National People’s Congress of the People’s Republic of China passed the newly revised Maritime Law, which will enter into force on May 1, 2026. It should be noted that this is the first revision to this law since it came into effect in 1993. For your easy reference, the law before the revision will be referred to as Maritime Law 1993, and the revised one will be referred to as Maritime Law 2026, although these are not official names of them.
Chapter 13 of this law stipulates marine insurance contracts. Marine insurance is defined as “a contract whereby the insurer undertakes, as agreed, to indemnify the loss to the subject matter insured and the liability of the insured caused by perils covered by the insurance against the payment of an insurance premium by the insured.”, and the covered perils “referred to in the preceding paragraph mean any maritime perils agreed upon between the insurer and the insured, including perils occurring in inland rivers or on land which is related to a maritime adventure.” Therefore, any legal relationship under a marine insurance contract shall be regulated and adjusted by this law.
Several articles of this Chapter have also been revised this time, and the content of these revisions will inevitably have a profound impact on China’s marine insurance industry. As we all know, China has been the world’s largest cargo insurance market and the second largest hull insurance market for several consecutive years, and China’s marine insurance market has very close connections and cooperation with overseas insurance markets including London and Singapore. Therefore, the revision on marine insurance contracts in China’s Maritime Law will also inevitably have an impact on overseas markets. Below, I will discuss the important revisions to Chapter 13 on marine insurance contracts.
Before starting the discussion, it should be noted that under China’s legal system, the special provisions in Maritime Law for marine insurance contracts shall take precedent over those general provisions stipulated in the Insurance Law of PRC. In the discussion of this article, comparisons between the provisions of these two laws will often be involved. Understanding this will help better understand the content of this article.
Newly Added Article 245 of Maritime Law 2026
Hull and Machinery Under Construction
Chapter 13 adds a new Article 245, which stipulates that relevant provisions of this Chapter shall apply to insurance contracts for hull and machinery under construction.
There is no clear provision in Maritime Law 1993 stipulating this, and there is no consensus among courts and judges as to whether a ship under construction belongs to a ship in the sense of Maritime Law. The most fundamental reason lies in the provision of Article 3 of Maritime Law 1993, which states“Ship as referred to in this Law means sea-going ships and other mobile units, but does not include ships or craft to be used for military or public service purposes, nor small ships of less than 20 tons gross tonnage.” It is difficult to infer from the literal wording that a vessel under construction falls within the definition of “ship” under this article. According to the judgement of Civil Retrial Case No. 242 of 2017 of the Supreme People’s Court, the applicable law for builder’s risk insurance shall be determined based on whether the insured vessel qualifies as a “ship” under Maritime Law 1993, through a stage-based assessment. For vessels that have not yet been substantially completed and lack navigational capability, the builder’s risk insurance is governed by Insurance Law rather than Maritime Law 1993.
There are notable differences in the similar rules between the Insurance Law and the Maritime Code 1993. For instance, regarding the duty of disclosure, Maritime Law 1993 adopts the “principle of full disclosure” (or principle of unlimited disclosure popularly used in China) which requires the insured to proactively disclose complete, accurate, and relevant information to the insurer. In contrast, the Insurance Law follows the “principle of disclosure upon inquiry,” where disclosure is only required when the insurer asks. Clearly, the former imposes a stricter duty of disclosure of the insured. Maritime Law also stipulates rules unique to marine insurance, such as constructive total loss, abandonment, and general average.
In addition, construction of vessels is different from other types of construction and has a closer connection to admiralty and maritime affairs. It is more appropriate that Builder’s Risk insurance is governed by Maritime Law. This amendment provides greater certainty as to the governing law in relation to Builder’s Risk insurance. It is worth noting that, from the perspective of the duty of disclosure, this amendment is more favorable to the insurer.
The Amendment to Article 223 of Maritime Law 1993
Duty of Disclosure
As we have mentioned in above part, Maritime Law 1993 adopts the “principle of full disclosure”. Failure to fulfill this duty will lead to corresponding legal consequences for the insured. If such failure is due to the insured’s intentional act, “the insurer has the right to terminate the contract without refunding the premium. The insurer shall not be liable for any loss arising from the perils insured against before the contract is terminated.” If such failure is due to the insured’s unintentional act (dose not disclose or discloses wrongly), “the insurer has the right to terminate the contract or to demand a corresponding increase in the premium.” Therefore, the insurer has two optional rights under such circumstances. Where the insurer chooses to terminate the contract, article 223 of Maritime Law 1993 only stipulates that “the insurer shall be liable for the loss arising from the perils insured against which occurred prior to the termination of the contract”. Article 248 of Maritime Law 2026 goes on to specify further legal consequences based on the content of article 223 of Maritime Law 1993, which is mainly about the treatment of refund.
a. If the contract is terminated prior to the inception date of the policy, the full premium shall be refunded, provided that the insurer is entitled to charge a service fee. To cover the likely cost of the insurer incurred prior to such termination, it’s reasonable for the insurer to charge service fee. However, this is merely a paper right for the insurer under the current market conditions, it is extremely difficult for the insurer to exercise this right.
b. If the contract is terminated after the inception date of the policy, the premium for the unexpired period shall be refunded to the insured. This article does not stipulate further in detail about the calculation of refund. However, this problem is easy to solve. For H&M time clause, builders’ risk insurance, or marine liability insurance, the refund of premium for the unexpired period could be calculated on a pro‑rata daily basis or according to the refund ratio specified in the insurance contract. But for marine cargo insurance, the approach shall vary with each situation:
- For an annual open policy, where the minimum and deposit premium has been paid, the premium for the unexpired period shall be calculated as “the deposit premium minus the premium corresponding to those shipments that have actually taken place prior to the termination of the contract.”
For an annual open policy allowing periodical payment based on declarations, no refund issue arises, provided that both parties have settled the premium corresponding to shipments taken place prior to the contract termination.
- Article 248 of Maritime Law 2026 stipulates that the insurer may retain the premium and is not obligated to make a refund if the terminated contract is for voyage insurance. Obviously, this provision applies to single shipment of cargo insurance and voyage insurance for Hull & Machinery. Please note the terminology used here is “may”, which implies that it is only a “paper right” of the insurer if the premium has not been paid prior to the termination.
Compared with article 223 of Maritime Law 1993, article 248 of Maritime Law 2026 adds a new provision stipulating that the insurer’s right to terminate the contract shall be extinguished if it is not exercised within thirty days from the date when the insurer knew or ought to have known of the grounds for termination.
Newly Added Article 249 of Maritime Law 2026
Insurer’s Duty
This newly added article concerns the insurer’s duty to prompt and explain the standard terms. Before this revision, such duty of the insurer is stipulated in article 17 of Insurance Law. According to the doctrine of lex specialis, article 249 of Maritime Law 2026 shall prevail when dealing with issues about the insurer’s duty to prompt and explain the standard terms in marine insurance contract. In the following part, I will discuss the differences between article 249 of Maritime Law 2026 and article 17 of Insurance Law, so that we can understand the potential impact on insurers after this revision.
a.The content to be prompted and explained. According to article 17 of Insurance Law, the insurer is obliged to prompt and explain the clauses that exclude the insurer’s liability (or exclusions). While article 249 of Maritime Law requires the insurer to prompt and explain those clauses that limit or exclude the insurer’s liability and other terms that materially affect the interests of the insured. It’s easy to understand what exclusions are. For those clauses that limit the insurer’s liability, we could take MWS clause in project cargo as an example. When a breach of the survey warranty occurs, the policy coverage will be downgraded from ICC(A) to ICC(C). The difficulty lies in how to understand “other terms that materially affect the interests of the insured”. This provision lacks measurable criteria and it’s easy to lead to disputes, which may be left at the judge’s discretion.
It should be noted that the insurer’s such duty is only limited to the “standard terms”, which are pre-formulated and for repeated use, according to Maritime Law 2026. And they do not need to prompt and explain those terms negotiated by both parties in the course of entering into a marine insurance contract. This point has been supported in the judgement of Civil Retrial Case No. 24 of 2021 of the Supreme People’s Court. But as China is not a common law country, other courts do not need to adhere to this judgement. In practice, most of the courts tend to impose heavier duty on insurers, also requiring them to prompt and explain those negotiated terms. For this, it’s better for insurers to endeavor to prompt and explain all clauses pertinent to coverage.
b. According to Article 17 of Insurance Law, the insurer must “prompt and explain” simultaneously. While under article 249 of Maritime Law 2026, the insurer must prompt but explain when required.
c. Failing to fulfill this duty, relevant clauses shall not be effective according to article 17 of Insurance Law. According to article 249 of Maritime Law, non-fulfillment of such duty by the insurer does not automatically invalidate the relevant terms. Only if such failure results in the insured’s failure to notice or comprehend a clause that materially affects his/her interests, then may the insured assert that the clause does not form part of the contract.
However, an exception is allowed. That is the insured knew or ought to have known the content of the clause. I understand this is a protection for insurers. Obviously, the insured could not assert that they do not notice and understand terms resulting from multiple rounds of negotiation. Also, if they have signed and declared that they have noticed and understood those standard terms, it’s hard for the insured to claim that these terms are void.
The Amendment to Article 231-233 of Maritime Law 1993
Open Policy
The principal amendments are as follows:
a. Article 231 has been revised to include the definition of open policy.
b. Paragraphs 1-3 of Article 259 stipulate the insured’s duty of declaration under an open policy and the legal consequences for its non-performance.
- The obligation to make declarations prior to the commencement of each voyage.
- Where the insured intentionally fails to fully perform the declaration duty, the insurer is not liable for the loss of the relevant shipment but is entitled to retain the premium.
- Where the failure to fully perform is not intentional, the insured may make a supplementary declaration or correction, and its right to claim is not prejudiced. This effect is similar to that of the “Errors & Omissions Clause” (E&O Clause) commonly found in open policies. Prior to the amendment of the Maritime Law, the insured could only achieve the above purpose by requesting to add E&O clause. If the parties have made no agreement regarding the legal consequences of incomplete performance of the declaration duty, the matter may now be governed by Paragraph 3 of Article 259 without the need for an additional E&O Clause. This is a favorable provision for the insured.
c. Paragraph 4 of Article 259 provides that the stipulations in Paragraphs 1-3 shall apply only if the open policy contains no relevant agreement or no contrary agreement. Based on this provision, the law permits both parties to agree on terms in the open policy that differ from Paragraphs 1-3 of Article 259. For example:
- Allowing declarations to be made after the commencement of the voyage (post-shipment declaration).
- Still stipulating pre-shipment declaration, but imposing a stricter duty, agreeing that the insurer shall not be liable for undeclared shipments regardless of whether the failure to declare was intentional or not.
The Amendment to Article 235 of Maritime Law 1993
Warranties
The corresponding provision of article 235 of Maritime Law 1993 in Maritime Law 2026 is article 261. The differences between these two articles are:
a. As per Article 235, if the insured breach warranty clauses, they shall be required to immediately notify the insurer in writing. Upon receiving the notice, the insurer could terminate the contract, modify the terms, or increase the premium. The issues here include:
- It is out of sync with practice in most cases. This is because the common scenario is that the insured breaches warranty clauses without being aware of it, so how can they notify the insurer?
- If the insured is unaware of the breach and therefore does not notify the insurer, the insurer never gets the opportunity to exercise their rights.
- Since many warranty clauses are established by the insurer to control risk, from the moment the insured violates the warranty, as long as the insured does not notify the insurer, the insurer remains exposed to a level of risk that exceeds their acceptable range.
Article 261 of Maritime Law 2026 adopts a more practical approach by removing the requirement for the insured to notify the insurer. Whether a warranty clause has been breached is purely a matter of fact. Once a breach occurs, the fact exists objectively and is not affected by whether the insured is aware of it.
b. Both articles stipulate that if a warranty clause is breached, the insurer is granted three options following a breach of warranty: to terminate the contract, to modify the terms of coverage, or to increase the premium. However, article 261 of Maritime Law 2026 elaborates further:
- If the insurer chooses to terminate the contract, a written notice is required, and the contract is terminated only when the notice reaches the insured (i.e., the “receipt rule” applies).
- Insured events that occur prior to the breach of a warranty clause shall be covered by the insurer, who remains liable for compensation.
- The insurer shall not be liable for insured events that occur between the time of the breach and the termination of the contract. Exceptions to this include: if the breach has no impact on the occurrence of the event, or if the insured has already rectified the breach before the insured event occurred. It should be noted that the word used in the first exception is “impact”. It does not place an emphasis on causation between the breach of warranty and the occurrence of the loss. For example, there is a warranty in the contract that fully enclosed container shall be used for transportation of the insured goods (machinery). However, the subject matter is loaded into an open-top container. During transit, a road traffic accident leads to a loss of the insured goods. The insurer may not be able to reject the claim as it’s a little hard for the insurer to prove that using open-top containers has impact on the loss. In other words, even with the use of fully enclosed containers, the risk of cargo damage from traffic accidents remains. But the situation will be different if the cargo rusts from rain during transit.
Other Amendments
In addition to the revisions in the chapter on marine insurance contracts, many other chapters of Maritime Law 1993 have also been amended. For example, the inclusion of cargo transportation between ports of the People’s Republic of China within the scope of Maritime Law 2026; adjustments to the obligations of carriers; expansion of the scope of actual carriers; special provisions on the seaworthiness obligations of domestic cargo carriers; under specified circumstances, carriers are not only exempt from liability for loss or damage to goods but also for delays in delivery; new regulations on electronic transport records; and amendments to the statute of limitations for marine insurance contract litigation. These revisions will inevitably have certain impacts on the underwriting and claims of marine insurance.
