EEI Insurance Malaysia | Electronic Equipment Coverage Guide

Your factory's fire insurance doesn't cover a voltage surge that destroys RM10M worth of test equipment. Your machinery breakdown policy doesn't cover contamination damage to a lithography stepper. And your IAR policy doesn't cover the internal electronic defect that fries your DCS control system. Electronic Equipment Insurance (EEI) fills all three gaps.

This guide explains exactly what EEI covers, who needs it, how it differs from MB and IAR, what drives premiums, and why the loss-of-profits extension (ILOP) is often worth more than the equipment cover itself.

This guide covers:

• What EEI actually insures and what triggers a claim
• EEI vs MB vs IAR: which policy covers which equipment
• Who needs EEI in Malaysia (by industry)
• ILOP: the loss-of-profits extension you can't afford to skip
• Premium factors and what drives your rate
• Real claim scenarios with policy response breakdowns
• How to structure EEI within your P&E programme

What Does EEI Actually Cover?

Electronic Equipment Insurance is an all-risks policy covering sudden and unforeseen physical loss or damage to scheduled electronic equipment. "All risks" means everything is covered unless specifically excluded. This is the opposite of fire insurance, where only named perils (fire, lightning, explosion) are covered.

The practical effect: EEI covers damage causes that no other policy in your P&E programme touches. It's the only policy that covers internal electronic defects, voltage anomalies, and contamination damage to electronic and precision equipment.

Covered Causes of Loss

Cause of Loss	Example	Covered by EEI?	Covered by Fire/IAR?	Covered by MB?
Voltage surge / power spike	TNB switching event sends voltage spike through ATE systems	Yes	No	Possibly (if classified as electrical equipment)
Short circuit / electrical overload	Internal wiring fault in a CNC controller causes board burnout	Yes	No	Yes (overlapping)
Defective insulation	Insulation degradation in a UPS system causes arc flash	Yes	No	Yes (overlapping)
Contamination damage	Chemical spill in cleanroom damages lithography tool optics	Yes	No (unless caused by insured peril)	No
Operator error	Technician drops a tool onto a wafer probe station, damaging the prober	Yes	No	Depends on policy wording
Design/manufacturing defect	Latent defect in a servo drive causes sudden failure	Yes (physical damage resulting from defect)	No	Yes
Humidity/moisture damage	HVAC failure causes humidity spike in server room; condensation on boards	Yes	No	No
Fire / lightning / explosion	Lightning strike damages server room equipment	Yes	Yes (overlapping)	No (fire excluded from MB)
Theft / malicious damage	Break-in at data centre; equipment stolen or vandalised	Yes (if extension included)	No (unless burglary extension)	No

Standard EEI Exclusions

Exclusion	What This Means	How to Manage
Wear and tear / gradual deterioration	Progressive degradation from normal use; ageing of components	Preventive maintenance programme; scheduled component replacement
Aesthetic defects	Scratches, dents, paint damage that don't affect function	No coverage needed; cosmetic only
Consumables and media	Toner, ink, paper, data on media (unless extension purchased)	External data media extension available; backup protocols for data
War / nuclear / terrorism	Standard market exclusions	Terrorism buyback available in some markets
Consequential loss	Lost revenue, penalties, extra expenses from equipment being down	Purchase ILOP (Increased Cost of Loss of Profits) extension

EEI vs MB vs IAR: The Coverage Map

The most common mistake in factory insurance is putting electronic equipment on the wrong policy. This creates gaps when a claim happens and the policy you thought would pay doesn't respond. Here's how the three property/equipment policies divide responsibility.

Policy	Covers	Coverage Basis	Key Exclusions
EEI	Electronic and precision equipment (servers, process tools, test equipment, control systems)	All risks of physical damage	Wear and tear, consumables, consequential loss (without ILOP)
MB	Mechanical and rotating equipment (compressors, pumps, turbines, motors, gearboxes)	Sudden and unforeseen internal faults	Fire/explosion (covered by IAR), wear and tear, external damage
IAR	Building, structure, stock, general contents, infrastructure	All risks of physical damage (property)	Mechanical/electrical breakdown, wear and tear, consequential loss (without BI)

Which Equipment Goes on Which Policy?

This is where most factories get it wrong. The rule of thumb: if the equipment's primary function relies on electronic precision, processing, or data, it belongs on EEI. If it's primarily mechanical (rotating, pumping, compressing), it belongs on MB. If it's a structure, stock, or general content, it belongs on IAR.

Equipment	Best Policy	Reasoning
Servers and networking equipment	EEI	Electronic data processing; voltage sensitivity is primary risk
UPS systems	EEI	Electronic power conversion; internal electronic failure is primary risk
Semiconductor process tools (lithography, etch, deposition)	EEI	Electronic precision equipment; contamination and voltage are primary risks
Test equipment (ATE, oscilloscopes, spectrum analysers)	EEI	Electronic measurement; internal electronic defect is primary risk
DCS/SCADA/PLC systems	EEI	Electronic process control; voltage and data integrity are primary risks
CNC machines	EEI or MB	Hybrid: electronic controller (EEI) + mechanical spindle/axis (MB); often placed on EEI
SMT placement machines	EEI	Electronic precision positioning; servo and vision system failures are primary risk
Chillers and cooling towers	MB	Mechanical compressor; bearing/motor failure is primary risk
Generators	MB	Mechanical rotating equipment; engine/alternator failure is primary risk
Transformers	MB or EEI	Can go on either; often placed with MB for consistency with power distribution
Building, cleanroom structure	IAR	Physical property; not equipment
Stock (wafers, components, finished goods)	IAR	Inventory; not installed equipment

The coordination principle: Every piece of equipment should appear on exactly one policy schedule. Duplication means you're paying twice. Gaps mean nothing pays. A specialist broker maps your entire asset register to the correct policy before placing coverage.

Who Needs EEI in Malaysia?

Any business whose core operations depend on electronic equipment worth more than RM1M should evaluate EEI. But the urgency varies dramatically by industry. Here's who needs it most.

Industry	Key Electronic Equipment	Typical EEI Sum Insured	EEI Priority
Data Centres	Servers, storage, networking, UPS, PDU, cooling controls	RM50M-500M+	Critical (equipment IS the business)
Semiconductor / E&E	Lithography, etch, deposition, bonding, ATE, metrology	RM100M-2B+	Critical (most valuable equipment in any factory)
Automated Manufacturing	CNC machines, robots, PLCs, vision systems, AGVs	RM5M-100M	High (automation = electronic equipment dependence)
Chemical / Petrochemical	DCS, SCADA, analysers, SIS controllers, variable speed drives	RM5M-50M	High (process control systems are safety-critical)
Telecommunications	Base stations, core network, fibre optic equipment, switching	RM10M-200M	High
Hospitals / Medical	MRI, CT scanners, lab analysers, patient monitoring	RM10M-100M	High (MRI alone costs RM5-15M)
Broadcasting / Media	Studio equipment, transmission systems, satellite uplinks	RM5M-50M	Medium-High

Not sure if your equipment qualifies for EEI? Talk to Foundation

ILOP: The Loss-of-Profits Extension That Matters More Than the Equipment Cover

EEI pays to repair or replace the damaged equipment. But your financial exposure doesn't stop at the equipment cost. While the equipment is down, production stops, revenue disappears, and customers find alternative suppliers. ILOP (Increased Cost of Loss of Profits) covers the gross profit you lose during the repair or replacement period.

Here's why ILOP matters more than the equipment cover for most businesses:

Scenario	Equipment Cost	Lost Revenue	ILOP as % of Total Loss
Data centre UPS failure (48 hrs downtime)	RM500K	RM2M+ (SLA penalties + lost hosting revenue)	80%
Semiconductor lithography stepper failure (18 months)	RM80M	RM270M (RM500K/day x 18 months)	77%
OSAT test floor surge damage (3 months repair)	RM25M	RM35M	58%
Factory DCS failure (2 weeks process shutdown)	RM800K	RM5M	86%

In every scenario, the lost revenue exceeds the equipment cost. For data centres, ILOP exposure can be 4x the equipment value. For semiconductor fabs, it's 3x. Without ILOP, you're insuring the smaller risk and self-insuring the larger one.

ILOP vs BI vs MLOP: Three Different Lost-Profit Policies

This is where many factory owners get confused. There are three separate loss-of-profits policies, each triggered by a different underlying event. You may need all three.

Policy	Attached To	Trigger	Example
BI (Business Interruption)	Fire / IAR	Fire, explosion, flood, storm (insured peril)	Factory fire destroys server room; 6 months to rebuild
MLOP	MB	Mechanical/electrical breakdown of machinery	Chiller compressor fails; 6 weeks to replace
ILOP	EEI	Electronic equipment damage (EEI-insured event)	Voltage surge destroys ATE systems; 3 months to repair

A voltage surge triggers ILOP, not BI or MLOP. A compressor breakdown triggers MLOP, not BI or ILOP. A fire triggers BI, not MLOP or ILOP. Each covers a different cause. Having only one or two of the three leaves gaps that become apparent only at claim time.

EEI Premium Factors

What determines how much you pay for EEI? Underwriters assess electronic equipment risks differently from fire or machinery risks. Here are the factors that drive your EEI premium.

Factor	What Underwriters Assess	Impact on Premium
Equipment type and value	Total sum insured; concentration of value in single items	High: larger total sum insured = lower rate per RM (volume discount)
Power quality	UPS capacity, voltage regulation, dual-feed supply, power conditioning	High: robust power protection = lower claims frequency
Environment	Temperature control, humidity control, dust filtration, cleanroom class	Medium-High: server rooms and cleanrooms get better rates than open factory floors
Equipment age	Average age of equipment fleet; end-of-life equipment percentage	Medium: older equipment = higher failure probability = higher rates or higher deductibles
Maintenance programme	OEM service contracts, preventive maintenance schedules, spare parts inventory	Medium: documented maintenance reduces failure frequency
Location risk	Lightning density, flood zone, TNB supply stability in area	Medium: areas with frequent power disruptions = higher EEI claims
Claims history	Last 5 years; frequency and severity	High: frequent surge claims indicate inadequate power protection
Deductible level	Higher deductible = lower premium; eliminates small frequent claims	Medium: increasing deductible from RM5K to RM50K can reduce premium 15-25%

Indicative EEI Premium Ranges

Facility Type	EEI Sum Insured	Indicative Annual Premium	Rate Range
Small data centre / server room	RM5M-20M	RM8,000-40,000	0.15-0.20%
Medium data centre	RM20M-100M	RM30,000-150,000	0.12-0.18%
Automated factory (CNC, robotics)	RM10M-50M	RM15,000-80,000	0.12-0.18%
Semiconductor OSAT facility	RM100M-500M	RM120,000-600,000	0.10-0.15%
Wafer fab (front-end)	RM500M-2B+	RM500,000-2M+	0.08-0.12%

These ranges are illustrative. Actual premiums vary based on the factors above, market conditions, and programme structure. ILOP premiums are additional and typically range from 50-100% of the base EEI premium depending on the indemnity period and revenue exposure.

Claim Scenarios: EEI in Action

Scenario 1: Data Centre Power Surge

A hyperscale data centre in Johor experiences a voltage transient during a TNB grid switching event. The surge bypasses the facility's primary UPS (which was in bypass mode for maintenance) and reaches the IT distribution boards. 120 servers, 15 network switches, and 8 storage arrays are damaged.

Loss Component	Cost	Policy
Server replacement/repair (120 units)	RM3.6M	EEI
Network and storage equipment	RM2.1M	EEI
SLA penalty payments to tenants	RM1.5M	ILOP
Lost hosting revenue (2 weeks partial outage)	RM800K	ILOP
Total loss	RM8.0M

Without EEI: The fire/IAR policy doesn't cover voltage surge damage (no fire occurred). The MB policy may not cover servers (they're electronic equipment, not mechanical machinery). The entire RM8M falls on the data centre operator. With EEI + ILOP, the full loss is covered.

Scenario 2: Semiconductor Test Equipment Contamination

A chemical spill in the backend area of a semiconductor OSAT facility releases corrosive fumes that enter the test floor through the shared HVAC system. 30 ATE (Automated Test Equipment) systems suffer corrosion damage to probe cards, handler contacts, and internal circuit boards.

Loss Component	Cost	Policy
ATE decontamination and repair (30 units)	RM12M	EEI (contamination damage to electronic equipment)
Probe card and handler replacement	RM3M	EEI
Lost test capacity (6 weeks recovery)	RM18M	ILOP
Total loss	RM33M

Without EEI: Contamination damage is not a fire. It's not a mechanical breakdown. IAR might cover cleanup of the building but not the electronic equipment damage. Only EEI covers corrosive contamination damage to electronic equipment. The ILOP exposure (RM18M) exceeds the equipment damage (RM15M).

Scenario 3: Factory PLC System Failure

An automated manufacturing plant's central PLC system (controlling 8 production lines) suffers an internal electronic defect, causing the entire control system to crash. While individual machines are undamaged, none can operate without the PLC issuing control commands. A replacement PLC system takes 3 weeks to configure, programme, and commission.

Loss Component	Cost	Policy
PLC hardware replacement	RM300K	EEI
System integration and programming	RM200K	EEI (reinstatement costs)
Lost production (8 lines x 3 weeks)	RM4.2M	ILOP
Total loss	RM4.7M

The lesson: The PLC cost RM300K. The lost production was RM4.2M. A RM300K piece of electronic equipment controls RM4.2M per week of factory output. This is why ILOP exposure is always the larger number. And without EEI, an internal electronic defect isn't covered by any other policy in your programme.

Get an EEI premium indication from Foundation

How to Structure EEI Within Your P&E Programme

EEI doesn't exist in isolation. It's one layer of a coordinated P&E programme. Here's how it fits with the other policies.

Step	Action	Why It Matters
1. Asset register	List every piece of equipment with replacement value, age, and function	You can't insure what you haven't identified; prevents gaps and overlaps
2. Classification	Assign each asset to EEI, MB, or IAR based on primary function	Prevents duplication (paying twice) and gaps (nothing pays)
3. Sum insured	Declare replacement value (new-for-old) for each scheduled item	Underinsurance triggers average clause; outdated values = reduced payouts
4. ILOP assessment	Calculate gross profit at risk if each critical system fails; set indemnity period	ILOP exposure typically exceeds equipment value; indemnity period must match replacement lead time
5. Deductible strategy	Set deductibles based on your ability to absorb small losses	Higher deductible = lower premium; eliminates small claims that inflate your record
6. Coordination check	Verify no equipment appears on both EEI and MB schedules	Overlapping coverage wastes premium; insurers may dispute which policy pays

EEI for Data Centre Operators

Data centres are the purest case for EEI because virtually every asset in the facility is electronic equipment. Servers, storage arrays, network switches, PDUs, UPS systems, and building management systems all qualify for EEI. The building shell and cooling infrastructure go on IAR and MB respectively.

For data centre operators, EEI considerations include:

• Tenant vs landlord obligations. In colocation facilities, the building owner insures the facility infrastructure (UPS, cooling, power distribution) while tenants insure their own IT equipment. The split must be clearly defined.
• SLA exposure. ILOP must account for SLA penalty payments to tenants, not just lost hosting revenue. A 4-hour outage can trigger SLA credits across hundreds of tenants.
• Rapid replacement. Unlike semiconductor equipment with 12-24 month lead times, servers can often be replaced within days. ILOP indemnity periods for data centres are typically shorter (6-12 months) but the daily loss rate is higher.

EEI for Automated Manufacturing

Modern factories increasingly rely on electronic control and automation. CNC machines, industrial robots, AGVs, vision inspection systems, and factory-wide MES/PLC systems are all electronic equipment that traditional fire and MB policies don't adequately cover.

If your factory has invested in Industry 4.0 automation, your electronic equipment exposure has grown significantly. A factory that operated on manual machines 10 years ago and now runs on CNC, robotics, and automated inspection has shifted from a predominantly MB exposure to a combined MB + EEI exposure. Your insurance programme should reflect this shift.

FAQ

What's the difference between EEI and machinery breakdown?

EEI covers electronic and precision equipment (servers, process tools, test equipment, control systems) against all risks of physical damage. MB covers mechanical and rotating equipment (compressors, pumps, turbines, motors) against sudden internal faults. The key overlap is electrical items like transformers, which can go on either. The key difference: EEI covers contamination, humidity, and voltage damage that MB doesn't.

Does my fire insurance already cover my servers?

Your fire insurance covers fire damage to servers. But the top causes of server loss aren't fire: they're voltage surges, internal electronic defects, humidity damage, and contamination. None of these are covered by fire insurance. EEI covers all of them. If your servers are only on your fire policy, you're insuring against the least likely cause and ignoring the most likely ones.

How do I determine the correct sum insured for EEI?

Use replacement value (the cost to buy equivalent new equipment today), not book value or depreciated value. Electronic equipment depreciates fast on the books but replacement costs don't fall as quickly. If your 3-year-old server is worth RM10K on the books but costs RM80K to replace with an equivalent new unit, declare RM80K. Underinsurance triggers the average clause.

Is EEI worth it for a small factory with RM2M in electronic equipment?

At RM2M sum insured, your EEI premium would be approximately RM3,000-4,000 per year. If your factory's CNC machine (RM800K) suffers a control system failure, EEI covers the repair. Without it, you pay out of pocket. For RM3,000/year, you're buying cover against a RM800K loss. The economics are clear even for smaller operations.

Does EEI cover software?

Standard EEI covers the physical hardware only. Software and data are not covered unless you purchase the external data media extension. This extension covers the cost to restore data and reinstall software from backup media after an insured physical damage event. It does not cover software bugs, cyber attacks, or data corruption without physical damage.

What happens if my equipment is on both EEI and MB schedules?

This creates an overlap where both policies could potentially respond to the same loss. In practice, the insurers will argue about which policy pays, delaying your claim. The solution is proper classification at programme inception: assign each item to exactly one policy. A specialist broker ensures no overlaps or gaps exist in the equipment schedule.

How long should my ILOP indemnity period be?

Match it to the longest equipment replacement lead time in your EEI schedule plus commissioning time. For standard IT equipment (servers, networking), 6-12 months is usually sufficient. For semiconductor process tools, 24-36 months. For specialised test equipment, 12-18 months. Setting it too short means your coverage runs out before you're back in production.

Does EEI cover damage from TNB power outages?

EEI covers damage caused by power fluctuations, voltage surges, and supply interruptions. If a TNB event sends a voltage spike that physically damages your equipment, EEI covers the repair. But EEI does not cover the power outage itself or lost revenue purely from being without power (with no physical damage). ILOP covers lost revenue only when triggered by physical damage to insured equipment.

Can I buy EEI without ILOP?

Yes, EEI is a standalone equipment damage policy. ILOP is an optional extension. But as this guide demonstrates, ILOP exposure typically exceeds equipment damage by 2-5x. Buying EEI without ILOP means you're covering the smaller financial risk and ignoring the larger one. Foundation always recommends EEI + ILOP as a pair.

Does Foundation handle large EEI programmes for semiconductor fabs?

Yes. Large semiconductor EEI programmes (RM500M-2B+ sum insured) require placement in international specialty markets because no single Malaysian insurer has the capacity. Foundation works with London, Singapore, and Japanese reinsurance markets that specialise in semiconductor and technology risks. The key is presenting the risk with the technical equipment detail and loss-prevention narrative that specialty underwriters need.

Foundation Conclusion

Electronic Equipment Insurance fills the coverage gap between your fire/IAR policy and your machinery breakdown policy. It's the only policy that covers voltage surges, contamination damage, internal electronic defects, and humidity-related failures that destroy electronic and precision equipment. For data centres, semiconductor fabs, and automated factories, EEI protects the most valuable and vulnerable equipment in the facility.

But the real financial exposure isn't the equipment itself. It's the revenue you lose while the equipment is down. ILOP consistently accounts for 60-85% of total EEI claim values. A complete EEI programme pairs equipment cover with adequate ILOP to protect both the asset and the income it generates.

Talk to Foundation about EEI for your facility