EECA 2025: The Insurance Gaps You'll Create While Complying

Your factory consumes more than 21,600 gigajoules of energy per year. You know the Energy Efficiency and Conservation Act (EECA) 2024 applies to you. You've appointed an energy manager, started planning your first energy audit, and you're getting quotes from ESCOs to upgrade your chillers, lighting, and HVAC systems.

Here's what nobody has told you: the retrofit work itself creates insurance exposures that your existing policies probably don't cover.

This guide covers:

• Who EECA applies to and what it requires
• The insurance gaps created during EECA compliance activities
• What happens to your coverage when contractors are on-site doing retrofit work
• How to protect new equipment from day one
• The professional indemnity question for ESCOs and energy auditors

What Is EECA and Who Does It Apply To?

The Energy Efficiency and Conservation Act 2024 (Act 861) came into force on 1 January 2025. It's enforced by the Energy Commission (Suruhanjaya Tenaga) and applies to Peninsular Malaysia and the Federal Territory of Labuan only. Sabah and Sarawak have been tasked with creating their own energy efficiency regulations.

EECA replaces the older Efficient Management of Electrical Energy Regulations 2008 (EMEER). The key difference: EECA covers all forms of energy (including thermal), not just electricity. And it makes energy audits mandatory.

Who It Applies To	Threshold	What's Required
Large energy consumers (industrial/commercial)	≥21,600 GJ/year (≈RM2.4M electricity bill or ≈RM1M gas bill annually)	Appoint Registered Energy Manager, implement Energy Management System, conduct mandatory energy audits, submit reports
Office buildings	≥8,000 sq m gross floor area	Obtain and display Energy Intensity Label, meet minimum BEI rating (≤250 kWh/m²/year for 2-star), conduct energy audit if non-compliant
Manufacturers/importers of energy-using products	All regulated products	Register with Energy Commission, obtain Certificate of Energy Efficiency, affix energy efficiency rating labels

According to figures cited during the parliamentary tabling, about 1,200 to 1,500 industrial consumers (out of roughly 28,867 registered industries) fall above the threshold. That's roughly 4% of industrial consumers, but they represent 70% to 80% of total industrial energy consumption.

The Compliance Cycle Creates a Retrofit Wave

Here's where insurance comes in. EECA doesn't just ask you to measure energy consumption. It requires you to act on the findings. After your first energy audit, you'll have an energy efficiency improvement plan. And that plan almost always involves physical changes to your facility.

Typical EECA Compliance Activity	What It Involves Physically	Insurance Exposure Created
Chiller replacement/upgrade	Removing old unit, crane lifts, refrigerant handling, new installation, commissioning	CAR/EAR for installation, MB for new unit, CGL for contractor on-site
HVAC system overhaul	Ductwork modification, new AHUs, BMS integration, electrical rewiring	CAR for works, EEI for BMS/controls, fire risk during hot works
LED lighting retrofit	Electrical work across production floor, working at height, temporary power disruptions	CGL for contractor, WC for workers, production interruption risk
Variable Speed Drive (VSD) installation on motors	Electrical panel modifications, motor controller installation, testing	EEI for new drives, MB for modified motor systems
Boiler efficiency upgrade	Burner replacement, economiser installation, flue gas system modification	BPV for pressure vessel modifications, CAR for installation works
Energy Management System (EnMS) installation	Sensors, sub-metering, IoT devices, central monitoring software	EEI for electronic monitoring equipment
Compressed air system optimisation	Compressor replacement, piping modifications, leak repairs, receiver tank changes	MB for new compressors, BPV for receiver tanks

Every one of these activities brings contractors onto your site, introduces temporary hazards, and changes the risk profile of your facility. Your existing insurance programme was underwritten based on your facility as it was, not as it will be during and after the retrofit.

Five Insurance Gaps EECA Compliance Creates

Gap 1: Retrofit Works Without Contractor's All Risks

When an ESCO or M&E contractor comes on-site to replace your chiller or overhaul your HVAC, that's construction/installation work. Your existing IAR policy covers your property against fire and perils, but it typically excludes damage arising from construction or installation activities on your premises.

The contractor should carry their own Contractor's All Risks (CAR) or Erection All Risks (EAR) policy. But many ESCO firms and smaller M&E contractors don't. If a contractor drops a chiller during installation and it damages your production floor, who pays?

Check before work starts: Require your ESCO contractor to provide a Certificate of Insurance showing active CAR/EAR coverage with your company named as a principal. If they can't, consider taking out a project-specific policy.

Gap 2: New Equipment Not Added to Machinery Breakdown Coverage

You replace a 20-year-old chiller with a new, energy-efficient unit. The old chiller was listed on your Machinery Breakdown schedule. The new one costs twice as much and uses different technology.

If you don't update your MB schedule, one of two things happens: the new chiller isn't covered at all, or it's covered at the old unit's sum insured, which is now inadequate. Either way, a breakdown claim will be painful.

Scenario	Without Updating Schedule	With Updated Schedule
New chiller suffers compressor failure	Claim rejected or paid at old sum insured (underinsured)	Full repair/replacement covered at correct value
VSD-equipped motor burns out	VSD not on schedule; motor listed at pre-upgrade value	Motor + VSD covered as combined unit
BMS server/controller fails	Not listed anywhere; falls between MB and EEI	Listed under EEI schedule with correct sum insured

The fix is simple but often forgotten: every time you commission new equipment as part of your EECA improvement plan, notify your insurance intermediary and update your schedules.

Gap 3: Production Interruption During Retrofit

Chiller replacements take days. HVAC overhauls can take weeks. During that time, your factory may need to slow down or stop production in certain areas. Your Business Interruption (BI) policy covers revenue loss from fire and insured perils, not from planned maintenance or retrofit downtime.

But here's the real risk: what if the retrofit goes wrong? A contractor accidentally damages a power cable during HVAC ductwork installation, and your entire production line goes down for three days. That's not planned downtime; it's an accidental event. Whether your BI policy responds depends on the cause and your policy's trigger mechanism.

If the damage was caused by the contractor and they have adequate CGL coverage, their policy may cover your consequential losses. If they don't have CGL, or their limit is too low, you're absorbing the production loss yourself.

Gap 4: Electrical Work and Fire Risk

LED lighting retrofits and VSD installations involve electrical work across your facility. The Suruhanjaya Tenaga requirements for electrical installations still apply. Hot works, cable pulling, and panel modifications all introduce fire risk.

Your fire insurance covers your building and contents. But if a fire starts during retrofit works being conducted by a contractor, the insurer will ask: was the contractor authorised? Did they have a hot works permit? Were fire watch procedures in place? Gaps in these controls can complicate claims.

Your fire policy should be informed about any significant construction or renovation works happening on your premises. Some policies require prior notification for works involving hot processes.

Gap 5: ESCO and Energy Auditor Professional Liability

Your Registered Energy Auditor (REA) conducts an audit and recommends replacing specific equipment. You follow the recommendation and spend RM2 million on new chillers. Six months later, the energy savings don't materialise because the auditor's analysis was flawed, or the ESCO specified the wrong equipment.

Who covers the financial loss? The auditor's or ESCO's Professional Indemnity (PI) policy should respond to claims arising from professional negligence. But many ESCOs in Malaysia don't carry PI coverage. And even those that do may have limits that are too low for the value of works they're recommending.

Before appointing an ESCO or energy auditor, ask for proof of PI coverage. If they're recommending equipment changes worth millions of ringgit, their PI limit should be proportionate to the exposure.

EECA Penalties vs Insurance Costs

Some factory operators weigh the cost of compliance against the risk of penalties. Here's the comparison.

Item	Cost/Penalty
EECA non-compliance penalty (after second audit cycle)	RM20,000 to RM100,000
Average annual compliance cost (industrial)	Approximately RM120,000/year (covers energy manager, EnMS, audits over 5-year cycle)
Average annual compliance cost (commercial)	Approximately RM100,000/year
Estimated electricity bill reduction from compliance	Up to 25% (per Energy Commission estimates)
Uninsured chiller failure during/after retrofit	Varies significantly by equipment type and capacity; can exceed the cost of the retrofit itself

The penalty for non-compliance caps at RM100,000. An uninsured equipment loss during or after a retrofit can far exceed that. The compliance cost is an investment. The insurance gap is a gamble.

Your EECA Insurance Checklist

Use this before any EECA-related retrofit or upgrade work begins.

☐	Action Item	Why It Matters
☐	Notify your insurer of planned retrofit works	Avoids policy conditions being breached due to unreported construction activity on-site
☐	Require ESCO/contractor to show CAR/EAR certificate of insurance	Transfers installation risk to the contractor's policy
☐	Require ESCO/contractor to show CGL certificate of insurance	Covers damage to your property caused by the contractor's operations
☐	Ask energy auditor/ESCO for PI coverage proof	Protects you if their professional recommendations cause financial loss
☐	Update MB/EEI schedules after commissioning new equipment	New equipment not on schedule = not covered or underinsured
☐	Review sum insured for upgraded equipment	Energy-efficient replacements often cost more than the units they replace
☐	Check if BI/MLOP indemnity period covers retrofit timeline	If retrofit extends over months, an accidental loss during that period needs adequate BI cover
☐	Confirm hot works permit process for electrical retrofits	Fire during unauthorised hot works can complicate fire insurance claims
☐	Schedule post-retrofit insurance programme review	Your facility's risk profile has changed; your insurance should reflect that

Which Policies Need Attention During EECA Compliance?

Policy	When It's Triggered by EECA Works	Action Required
Fire / IAR	Any construction or installation works on premises	Notify insurer of works; confirm coverage for fire arising from contractor activities
Machinery Breakdown + MLOP	Replacing or upgrading any mechanical/rotating equipment	Update schedule with new equipment specs and values after commissioning
EEI	Installing VSDs, BMS, smart meters, IoT sensors, energy monitoring systems	Add new electronic equipment to EEI schedule
CAR / EAR	Any installation, modification, or construction works	Contractor must carry CAR/EAR or principal takes out project policy
CGL	Third-party contractors working on your premises	Verify contractor carries CGL; confirm your own CGL covers contractor-related incidents
BPV	Boiler efficiency upgrades, burner replacements, economiser installations	Update BPV coverage; confirm DOSH Certificate of Fitness is revalidated after modification
Professional Indemnity	Appointing ESCO or energy auditor whose recommendations drive capital decisions	Require ESCO/auditor to demonstrate PI coverage proportionate to project value

FAQ

Does EECA apply to factories in Sabah and Sarawak?

No. EECA 2024 applies only to Peninsular Malaysia and the Federal Territory of Labuan. Sabah and Sarawak have been tasked with developing their own energy efficiency regulations separately.

What happens if I don't comply with EECA?

Penalties range from RM20,000 to RM100,000 and can include imprisonment of up to 2 years for certain offences. Penalties are applied after the second audit cycle (5 years from first audit), giving companies time to implement improvements. The Energy Commission has enforcement and inspection powers under the Act.

Does my existing factory insurance automatically cover new equipment installed during EECA upgrades?

Not automatically. Most Machinery Breakdown and EEI policies cover items listed on the schedule. New equipment must be added to the schedule with the correct sum insured after commissioning. Notify your insurance intermediary whenever you commission new equipment.

Should my ESCO contractor carry insurance?

Yes. At minimum, they should carry CAR or EAR for the installation works, CGL for third-party damage, and ideally Professional Indemnity for their design and advisory work. Ask for certificates of insurance before work starts.

Is solar panel installation covered under EECA?

No. EECA focuses purely on energy consumption efficiency. Installing solar panels counts as renewable energy generation, not energy efficiency. Using solar doesn't reduce your energy intensity under EECA's measurement framework. That said, solar installations create their own set of insurance requirements (CAR during installation, property coverage for the panels).

How much does EECA compliance cost per year?

Figures cited during the parliamentary tabling estimate approximately RM120,000 per year for industrial consumers and RM100,000 per year for commercial consumers, averaged over a 5-year compliance cycle. This covers the energy manager appointment, Energy Management System implementation, and energy audits. Capital expenditure for equipment upgrades is additional.

What's the difference between EMEER and EECA?

EMEER 2008 covered only electrical energy and did not require mandatory audits. EECA 2024 covers all forms of energy including thermal (fuel, gas, chilled water), mandates energy audits by registered auditors, and carries enforceable penalties. EECA also introduces building energy intensity labelling requirements.

Do I need a Chargeman for EECA compliance?

EECA requires you to appoint a Registered Energy Manager (REM), which is a different role from a Chargeman. However, if your EECA retrofit works involve modifications to medium or high-voltage electrical systems, you'll need a qualified Chargeman to supervise that electrical work under Suruhanjaya Tenaga's regulations.

Foundation Conclusion

EECA compliance isn't just a regulatory exercise. It triggers a wave of physical changes to your facility: new equipment, contractor works, modified systems. Every one of those changes shifts your risk profile.

Most factory and building operators focus entirely on the compliance side and forget to review their insurance programme. The result is gaps they only discover when something goes wrong during or after the retrofit. A pre-retrofit insurance review takes 30 minutes and can prevent months of claim disputes.

Talk to our risk specialists about your EECA retrofit coverage

Disclaimer: This article provides general guidance based on the Energy Efficiency and Conservation Act 2024 (Act 861) and insurance coverage available in the Malaysian market as of March 2026. Regulations may be amended and policy terms vary by insurer. Always verify current requirements with the Energy Commission or consult qualified professionals before making decisions.