Late Payment of Insurance Claims in Asia: What Energy and Power Companies in APAC Need to Know

This article aims to provide our energy and power sector clients in the Asia-Pacific (APAC) region with a clear understanding of the current legal and regulatory frameworks relating to late payment of insurance claims. It also highlights practical implications for energy producers, power utilities, and brokers operating in this dynamic market. By understanding these developments, energy and power businesses can better manage financial risk, strengthen their claims strategies, and safeguard operational continuity in the event of large and complex losses.

The Issue: Late Payment of Insurance Claims and Its Impact on Energy and Power Projects

In the energy and power sectors, where insured values are high, operational losses can be significant, and claims can involve both property damage and business interruption (BI) – prompt claims settlement is critical. Delays in claim payments, especially for undisputed amounts, can disrupt cash flow, financing obligations, and project schedules.

Unfortunately, delays remain common in APAC markets. While insurers may cite reasons such as awaiting reinsurance recoveries or finalizing complex loss assessments, this practice often leaves policyholders exposed. Energy companies and power plant operators, with high-value projects and long-tail claims, are particularly vulnerable to these delays.

Regulatory Landscape: APAC Provisions on Claim Settlement Delays

Across Asia, governments and regulators have begun tightening oversight on insurance claim settlement practices. Several jurisdictions now stipulate timeframes for claims payment and prescribe interest penalties for undue delays. However, the approach varies widely.

Countries with Clear Timeframes and Penalty Interest Include: 

• Bangladesh, China, India, Japan, Laos, Nepal, Philippines, Taiwan, Thailand, Vietnam

Key highlights for energy sector relevance:

• China: Requires insurers to pay a determinable minimum amount within 60 days, even if the final quantum remains unresolved. This is crucial for energy companies with large, complex claims that take time to assess.
• Taiwan: A high interest rate of 10% per annum applies to delayed payments, making prompt settlements financially compelling for insurers.
• India: Interest of 2% above the prevailing bank rate applies for delays beyond 30 days post submission of final documents.

Several APAC markets such as Singapore, Hong Kong, Indonesia, Malaysia, and South Korea remain without specific statutory provisions, leaving energy companies reliant on general contract law or litigation avenues.

Why This Matters for Energy and Power Companies

In the energy and power sectors, losses are often both capital and revenue intensive. Whether it’s a turbine failure at a power plant,offshore rig damage, or disruption at an LNG terminal, delays in claims settlement can severely impact financial performance and liquidity. In regions where penalties for insurers exist, energy producers and power utilities can leverage this to expedite settlements or recover meaningful compensation for delays.

Example:

In a recent APAC power sector claim involving a gas turbine failure at a combined-cycle power plant, the insurer, facing potential interest penalties under Taiwanese law, proactively deposited the undisputed portion of the claim into court to mitigate financial exposure while resolving the business interruption element. This tactical move, enabled by jurisdiction-specific regulations, helped both parties manage risk and preserved the insured’s cash flow position.

Emerging Claims Negotiation Tactics in the Energy and Power Sector

As awareness grows of these regulations and penalties, sophisticated energy companies, power utilities, and brokers are integrating legal provisions into claims negotiation strategies, particularly in disputes over coverage scope or loss quantum. By highlighting potential financial consequences of delays, policyholders can apply additional pressure for interim payments or faster final settlements.

Best Practices for Energy and Power Claims Negotiation:

• Identify jurisdictions with penalty provisions where claims are filed or litigation may occur.
• Request interim payments for undisputed claim elements in line with local legislation (e.g., China’s Article 26 of the Insurance Law).
• Quantify interest penalties early in negotiations to strengthen settlement positions.
• Leverage regional trends towards consumer (policyholder) protection to argue for reasonable settlement timelines.
• Review policy wording to ensure clarity on claims payment timelines and applicable interest terms, especially for cross-border energy and power assets.

Global and Regional Trends:

Globally, regulators are moving in favour of policyholders in the wake of high-profile claim disputes and delayed payouts. The UK’s Insurance Act 2015, for example, enshrined the right to prompt payment as an implied term in every insurance contract.

In APAC, this trend is accelerating. Countries without current provisions, such as Singapore and Indonesia, may soon follow, as pressure builds for enhanced policyholder protections – particularly for infrastructure-critical sectors like energy.

Important Precedent:

In a notable case involving a factory loss in Vietnam insured by a Taiwanese group, over 15 years of litigation in Taiwan ultimately resulted in the insured recovering a very substantial amount in accrued interest on top of the original loss itself – underlining the long-term financial impact of delayed settlements in high-value energy and industrial claims.

Conclusion: Key Takeaways for APAC Energy and Power Companies

As regulations and legal interpretations evolve across Asia, energy and power companies should actively monitor these developments, adjusting claims strategies accordingly to protect operational and financial stability.

Sector-specific actions:

• Audit outstanding claims against local legal frameworks to identify opportunities for interest claims or interim payment demands.
• Engage brokers and legal advisers early to leverage jurisdictional provisions in claims negotiations.
• Benchmark claim processing timelines in different markets to manage expectations and highlight unreasonable delays.
• Update risk management and claims protocols to reflect best practices for prompt settlement enforcement in regulated jurisdictions.

What is Howden doing for its clients? 

Energy and power projects and operations in APAC carry unique financial and operational risks. Howden fully understands all these issues and can help you navigate the regulatory landscape on late claim payments to obtain tangible financial benefits, improve cash flow resilience, and strengthen negotiation positions in a sector where downtime and financial uncertainty carry significant costs.