In which language will insurance policy interpretations and ambiguities be resolved in case of a dispute?

In Hong Kong, any language can be used for insurance policies, though it is safe to say that all but a handful of policies are in English. In the event of a dispute or ambiguity, common law precedents about the interpretation of English usage will prevail.

In China, foreign investors can have standardized insurance policies written in English, but a Chinese-language policy also will be issued. In case of a dispute, reference to "international practice" generally is the starting point of discussions. If ambiguity remains at issue, the Chinese-language policy will govern.

How will the regulations about admitted and non-admitted insurance operate in the future?

In the Hong Kong SAR, non-admitted insurance will continue to be permitted except for automobile liability and employees' compensation; these have always been governed by admitted insurance requirements.

China's insurance regulation provides for admitted insurance only. All domestic or foreign-owned companies and all joint ventures licensed to operate in China must purchase any insurance from insurers licensed to do business in China. Hong Kong's 276 insurers are not licensed; a policy issued in the Hong Kong SAR will not be considered admitted insurance.

What is the best technique for insuring property or goods that are shipped between plants, warehouses or other locations in China and the Hong Kong SAR?

Marine and air cargo insurance will continue to be specified in the documentation between consignor and consignee, as is the case in international commercial practice. C.I.F. (cost, insurance, freight) shipping terms allow a Hong Kong consignor to provide insurance of a shipment to China without breaching the insurance regulations of China. Similarly, a Chinese consignor can agree to C&F shipping terms that allow the Hong Kong consignee to arrange the insurance, and Chinese insurance regulation will not be breached.

How will export credit covers be affected by sole sovereignty?

The Hong Kong SAR has a separate membership in the World Trade Organization and has a separate credit rating from China. The SAR will remain a separate commercial entity in most legal aspects. Even bilateral issues such as American most favored nation status distinguishes between the Hong Kong SAR and China. All this supports the current expectation that export credit insurance for Hong Kong will be unaffected by the transfer of sovereignty.

Will underwriters treat Hong Kong property risks the same as property risks in China after the transfer? Will rates change?

As a developed economy, Hong Kong SAR enjoys a superior infrastructure, such as time-tested building standards and one of the best fire departments in the world. Discerning underwriters have recognized this and provide competitive and unregulated pricing for property insurance.

China is an emerging economy; underwriters have reflected their views in relatively higher pricing for the reinsurance capacity that supports China's continuing modernization.

The distinct insurance regulations of the Hong Kong SAR and China can be expected to permit a continuing difference between insurance costs.

If an insurance policy has an exclusion for China, will Hong Kong also be excluded after the transfer?

This is an ambiguity that needs to be resolved outside of Hong Kong SAR or China. Exclusions applying to China typically are found on global policies issued outside of China or Hong Kong. Therefore, questions of interpretation will be determined in jurisdictions not party to the Joint Declaration. The safest course is to check all global policies-excess/umbrellas, difference in conditions, directors and officers liability, etc.-and delete all exclusions or territorial limitations that apply to China.

These questions and answers illustrate how insurance is likely to operate in "one country, two systems." Many other issues will not have such clear-cut answers.

For example, both Hong Kong SAR and China require admitted auto liability insurance as a condition of vehicle licensing. So, vehicles traveling between the two jurisdictions require distinct registrations and insurance.

Such was precisely the case between the United States and Canada earlier in this century. Now, a single policy can respond to liability that might arise in either jurisdiction. In the not too distant future, the U.S.-Canadian model, which facilitated cross-border travel and commerce, may well find a practical application in Hong Kong and China.

Similar issues arising from differences in employees' compensation, employers liability and marine liabilities policies also can be expected to find a practical solution under the "two systems" concept.