Data Centre Operations Insurance Malaysia | EEI BI MB Guide

Your data centre is live. Servers are racked, cooling is running, clients are hosted. A chiller compressor fails at 2am during a Malaysian heatwave. Without redundancy, server room temperatures spike. You have 15 minutes before thermal shutdown begins cascading across racks.

This guide maps the complete insurance programme for operational data centres in Malaysia: which policy covers which equipment, how business interruption works for DC revenue, and where the coverage gaps are between EEI, Machinery Breakdown, IAR, and BI.

This guide covers:

• The complete operational DC insurance stack
• EEI: what it covers in a data centre context
• Machinery Breakdown vs EEI: which equipment goes where
• Business Interruption for DC revenue models
• IAR as the property foundation layer
• SLA penalties and whether insurance covers them
• Three operational claim scenarios with RM breakdowns

The Complete Operational DC Insurance Programme

An operational data centre has a fundamentally different risk profile from a factory or office building. Equipment value is extremely high relative to building value. Revenue is measured in minutes of uptime, not units of production. A single point of failure in the power or cooling chain can cause losses that exceed the value of the failed component by 100x.

EEI: The Primary DC Equipment Policy

Electronic Equipment Insurance (EEI) is the single most important equipment policy for a data centre. It covers the electronic equipment that IS the data centre: servers, UPS systems, PDUs, networking switches, routers, fibre optic systems, DCIM/BMS controllers, and security systems.

EEI covers causes of loss that IAR and Machinery Breakdown both exclude: internal electronic defects, voltage fluctuations, short circuits, insulation failure, and contamination damage to sensitive components.

What EEI Does NOT Cover in a DC

EEI has important exclusions that DC operators must understand:

The data loss exclusion is the most important one for DC operators. EEI replaces the physical hardware. It doesn't restore or recover the data that was on the failed equipment. Client SLA obligations for data integrity and recovery fall outside the scope of EEI.

MB vs EEI: Which Equipment Goes Where

A data centre contains both electronic equipment (EEI territory) and mechanical equipment (MB territory). Getting the classification right prevents gaps and avoids double-insuring.

The CRAC/CRAH split is common in DC insurance programmes. The electronic control boards, variable speed drives, and sensors go on EEI. The compressor, fan motor, and refrigerant circuit go on MB. This ensures both internal electronic and mechanical failure are covered by the appropriate policy.

Need help classifying your DC equipment for insurance? Talk to our specialists

Business Interruption for Data Centres

Data centre revenue loss from downtime is the single largest exposure. The physical damage that causes the downtime is often a fraction of the revenue lost. But BI coverage for DCs is more complex than for factories because DC revenue structures differ.

Three Loss-of-Profits Policies for Three Triggers

You need all three. A fire that destroys the DC triggers BI. A chiller seizure that forces load shedding triggers MLOP. A UPS failure that crashes servers triggers ILOP. Each covers a different cause of the same outcome: lost revenue.

DC Revenue Loss Estimates by Tier

These figures include direct hosting revenue only. They don't include SLA penalty payments, client churn, or reputational damage. The BI/MLOP/ILOP sum insured should be based on projected gross profit over the indemnity period (typically 12-18 months for DCs).

SLA Penalties: What Insurance Does and Doesn't Cover

DC operators commit to SLA uptime guarantees (99.99%, 99.999%). When downtime exceeds the SLA threshold, operators owe service credits or penalties to clients. These can be substantial.

Standard BI, MLOP, and ILOP policies cover loss of gross profit (revenue minus variable costs). They do not cover contractual penalties, SLA credits, fines, or liquidated damages. These are "consequential losses beyond BI" and are typically excluded.

Some bespoke wordings for large DC operators can negotiate limited coverage for service credits, but this is non-standard and requires specialist placement. For most operators, SLA penalty exposure is a retained risk managed through redundancy design (N+1, 2N) rather than insurance transfer.

Tenant vs Landlord Insurance Obligations

Colocation DCs have a split between what the operator (landlord) insures and what the tenant (client) insures. Getting this boundary wrong creates uninsured gaps.

The key grey zone: who insures client equipment damage caused by operator infrastructure failure? If a UPS failure sends a voltage spike through the PDU and damages client servers, the operator may be liable. CGL covers third-party property damage, but the limit must be adequate for the total value of client equipment in the facility.

Three Operational DC Claim Scenarios

Scenario 1: UPS Failure Causes Uncontrolled Power Loss

A static UPS in a Cyberjaya colocation DC suffers an IGBT (Insulated Gate Bipolar Transistor) failure. The UPS fails to transfer to bypass, causing an uncontrolled power loss to 200 server racks. Servers crash without graceful shutdown. Recovery takes 48 hours to fully restore services.

Three policies respond to one incident. Without EEI, the UPS replacement isn't covered. Without ILOP, the 48-hour revenue loss isn't covered. Without adequate CGL, the client equipment damage becomes a liability dispute.

Scenario 2: Chiller Failure During Heatwave

During a February heatwave (ambient 38°C), the primary chiller at a Johor DC suffers a compressor bearing seizure. The backup chiller handles partial load but can't maintain target temperatures. The operator must shed 40% of IT load to prevent thermal shutdown. Compressor repair takes 10 days.

The physical repair (RM450K) is a fraction of the revenue impact (RM2M). MLOP captures the financial loss that MB alone would miss. This scenario also shows why N+1 redundancy in cooling is both a risk management tool and a premium reduction factor.

Scenario 3: Fire in Battery Room

A lithium-ion battery cell in the UPS battery room experiences thermal runaway. The fire suppression system activates but the fire damages the battery array (RM4M), UPS modules (RM3M), and causes smoke contamination in the adjacent server hall requiring professional decontamination (RM1.5M). The DC is offline for 5 days.

Fire is an external peril, so IAR responds for all physical damage and BI covers the revenue loss. EEI and MB don't respond here because the cause is fire, not internal electronic or mechanical failure. This is why IAR remains essential even though EEI and MB are the "primary" DC equipment policies. See Fire Insurance vs IAR comparison.

Get a complete DC operations insurance programme review

FAQ

What's the most important insurance policy for an operational data centre?

EEI, because internal electronic equipment failure is the most frequent cause of DC equipment loss. But EEI alone doesn't protect you. You also need IAR for fire and external perils, MB for mechanical equipment (generators, chillers), and loss-of-profits extensions (BI, MLOP, ILOP) for revenue protection. All five work together.

Does EEI cover client servers in a colocation facility?

Only if the operator has insurable interest in client equipment and it's declared on the EEI schedule. Most colocation agreements require clients to insure their own equipment. The operator's EEI covers the operator's infrastructure (UPS, PDUs, networking), not client-owned servers. Check your colocation agreement for the insurance demarcation.

How is BI sum insured calculated for a data centre?

BI sum insured = annual gross profit x indemnity period. For DCs, gross profit is hosting revenue minus variable costs (electricity, bandwidth). Most DC costs are fixed (staff, facility maintenance, lease), so gross profit ratio is typically 60-80% of revenue. With a 12-month indemnity period and RM100M annual revenue at 70% gross profit ratio, the BI sum insured would be RM70M.

Does insurance cover SLA penalties to clients?

Standard BI, MLOP, and ILOP policies cover loss of gross profit, not contractual penalties. SLA service credits, liquidated damages, and performance penalties are typically excluded as "consequential losses beyond BI." Some specialist DC insurance programmes can negotiate limited SLA coverage, but this is non-standard and expensive.

What's the difference between ILOP and MLOP for a data centre?

ILOP covers revenue loss from electronic equipment failure (UPS crash, PDU fault, server hardware failure). MLOP covers revenue loss from mechanical equipment failure (generator breakdown, chiller seizure, pump failure). Both cover the same financial loss (gross profit) but are triggered by different causes and attached to different policies (EEI and MB respectively).

Does MB cover diesel generators in a data centre?

Yes. Diesel generators are mechanical equipment. MB covers internal failure: engine seizure, turbocharger failure, alternator winding burnout, governor malfunction. Fire damage or flood damage to the generator would be covered by IAR instead. Generator failure during a utility power outage (when the generator is most needed) is a common MB claim scenario.

What happens if utility power failure causes DC downtime?

Utility power failure itself is not insured (it's an external event beyond the DC operator's control). But if the backup power system (generators, UPS) fails to maintain operations during a utility outage, the resulting equipment damage and revenue loss may be covered by MB/MLOP (if the generator fails) or EEI/ILOP (if the UPS fails). The trigger is the equipment failure, not the utility outage.

Should I insure my data centre under IAR or Fire Insurance?

IAR. Almost every operational DC exceeds the RM50M minimum sum insured for IAR eligibility. IAR provides broader coverage (accidental damage, theft, integrated BI) that Fire Insurance cannot match. For DCs with high-value portable equipment (servers, networking gear), IAR's theft coverage is particularly valuable. See the full Fire vs IAR comparison.

How much does DC operations insurance cost annually?

Total operational insurance (IAR + EEI + MB + BI + MLOP + ILOP) typically costs 0.15% to 0.35% of total insured values annually. For a DC with RM300M in total assets and RM100M in BI exposure, expect RM600K to RM1.4M annually. EEI and the loss-of-profits extensions are the largest premium components.

Does insurance cover data loss in a data centre?

No. EEI covers the physical hardware. IAR covers fire damage to hardware. Neither covers the data stored on the equipment. Data loss, recovery costs, and liability to clients for lost data require cyber insurance and robust backup/DR programmes. Insurance protects the physical infrastructure; data protection is an operational responsibility.

Foundation Conclusion

Operational data centre insurance requires five interlocking policies: IAR for the building and external perils, EEI for electronic equipment, MB for mechanical infrastructure, and three loss-of-profits extensions (BI, MLOP, ILOP) to cover revenue loss from every possible trigger. Missing any one of these creates a gap where the most common DC incidents fall.

The financial exposure from DC downtime dwarfs the physical damage that causes it. A RM500K chiller repair can trigger RM2M in lost revenue. A RM2.5M UPS failure can cascade into RM5M+ total loss. Structuring these policies correctly, with matched sum insured values, aligned indemnity periods, and appropriate deductibles, is where specialist P&E insurance knowledge makes the difference.

Talk to our data centre insurance specialists about your operational programme