Electronic Equipment Insurance (EEI) Malaysia
Specialist coverage for electronic and electrical equipment against internal faults, power surges, short circuits, and accidental damage. For data centres, factories, and automated facilities.
Our Specialisation
Property & Engineering Specialists
Technical Risk Understanding
Malaysian & Regional Markets
Your data centre's UPS system suffers an internal electrical fault at 2am. The cascade takes out three server racks before the backup kicks in. You check your IAR policy and discover: internal electrical fault in electronic equipment is excluded. Your machinery breakdown policy excludes electronic equipment too. Neither policy responds.
Electronic Equipment Insurance (EEI) fills this gap. It covers electronic and electrical equipment against sudden and unforeseen damage, including the internal faults that IAR and fire policies specifically exclude. For any facility where electronic equipment is the backbone of operations, EEI is not optional.
This page covers:
- What EEI covers and how it differs from IAR and machinery breakdown
- Equipment types covered under EEI
- Who needs EEI in Malaysia (data centres, factories, automated facilities)
- Premium factors and indicative rates
- Common exclusions and coverage extensions
- Claim scenarios showing how EEI responds
- What your broker needs to get you quoted
What Does EEI Insurance Cover?
EEI covers sudden and unforeseen physical damage to electronic and electrical equipment from any cause not specifically excluded. This includes internal faults, which is the key differentiator. Fire insurance, IAR, and standard machinery breakdown policies all exclude internal electronic/electrical faults in different ways. EEI is designed specifically to cover them.
| Cause of Damage | What Happens | EEI Response |
|---|---|---|
| Short circuit / arcing | Internal electrical fault damages circuit boards, processors, power supplies | Covered. Repair or replacement of damaged components. |
| Power surge / voltage spike | External power fluctuation damages sensitive electronics | Covered. Includes damage from TNB grid instability. |
| Insulation failure | Wiring insulation degrades suddenly, causing electrical fault | Covered. Sudden insulation failure (not gradual deterioration). |
| Overheating | Cooling failure or overload causes thermal damage to components | Covered. Includes damage from HVAC/cooling system failure. |
| Accidental damage | Equipment dropped, impacted, or physically damaged during operation or maintenance | Covered. Includes operator error and maintenance accidents. |
| Water damage | Pipe burst, sprinkler discharge, or condensation damages equipment | Covered. Water ingress to electronic equipment. |
| Lightning (indirect) | Induced voltage from nearby lightning strike damages electronics | Covered. Includes surge damage from indirect lightning. |
| Theft / malicious damage | Equipment stolen or deliberately damaged | Covered (typically requires forced entry evidence for theft). |
EEI operates on an all-risks basis, similar to IAR insurance. Everything is covered unless specifically excluded. The difference is that EEI is designed for the unique failure modes of electronic equipment, where internal faults are the primary risk.
What Equipment Does EEI Cover?
EEI covers a broad range of electronic and electrical equipment. The policy schedule lists each item with its sum insured. Any electronic device that your business depends on can be insured under EEI.
| Equipment Category | Examples | Typical Industry |
|---|---|---|
| Servers and IT infrastructure | Rack servers, storage arrays, networking switches, routers, firewalls | Data centres, corporate IT |
| UPS and power systems | Uninterruptible power supplies, battery banks, power distribution units | Data centres, hospitals, critical facilities |
| Industrial control systems | PLCs, SCADA systems, DCS, HMI panels, variable frequency drives (VFDs) | Manufacturing, process plants, utilities |
| CNC and precision equipment | CNC machine controllers, laser cutters, 3D printers, coordinate measuring machines | Precision manufacturing, E&E |
| Cooling and environmental systems | Precision cooling units (CRAC/CRAH), chillers with electronic controls | Data centres, cleanrooms, labs |
| Electrical switchgear | Medium/low voltage switchgear, transformers, bus ducts, circuit breakers | All industrial facilities |
| Semiconductor equipment | Wafer processing, lithography, etching, testing, assembly and packaging | Semiconductor fabs, E&E assembly |
| Medical and laboratory equipment | MRI machines, CT scanners, lab analysers, diagnostic imaging systems | Hospitals, pharmaceutical labs |
| Telecommunications | Telecom base stations, satellite equipment, broadcast systems | Telcos, broadcasters |
| Robotics and automation | Industrial robots, automated guided vehicles (AGVs), conveyor control systems | Automotive, E&E, logistics |
EEI vs Other Insurance: Understanding the Gaps
The most common mistake is assuming fire insurance, IAR, or machinery breakdown already covers electronic equipment failures. They don't, or they cover only limited aspects. Here is how the policies differ.
| Event | Fire Insurance | IAR | Machinery Breakdown | EEI |
|---|---|---|---|---|
| Server short circuit (internal fault) | NOT covered | NOT covered | May cover if listed | Covered |
| Power surge damages PLC controllers | NOT covered | Partial | May cover if listed | Covered |
| Fire destroys server room | Covered | Covered | NOT covered | Covered |
| UPS battery failure causes cascade | NOT covered | NOT covered | NOT covered | Covered |
| Water pipe burst floods equipment | NOT covered | Covered | NOT covered | Covered |
| Operator accidentally damages CNC controller | NOT covered | Covered | NOT covered | Covered |
The key insight: Machinery breakdown insurance covers mechanical equipment (motors, compressors, turbines). EEI covers electronic equipment (servers, PLCs, switchgear). They are companion policies, not substitutes. A modern factory needs both.
Who Needs EEI Insurance in Malaysia?
Any operation where electronic equipment failure would cause significant financial loss. The more your business depends on electronics, the more you need EEI.
| Industry | Key EEI Exposures | Why EEI Is Critical | Typical Equipment Values |
|---|---|---|---|
| Data centres | Servers, storage, networking, UPS, cooling controls, PDUs | Entire revenue depends on equipment uptime. Internal faults are the #1 threat. | RM50M-500M+ |
| Semiconductor and E&E | Wafer processing, testing, assembly, cleanroom controls | Single equipment items worth RM5-50M each. Replacement lead times 6-18 months. | RM100M-1B+ |
| Automated manufacturing | PLCs, SCADA, DCS, robotic arms, VFDs, CNC controllers | Production line depends entirely on electronic control systems. | RM10M-100M |
| Pharmaceutical and medical | Lab analysers, cleanroom controls, MRI, CT scanners, diagnostic systems | Equipment failure disrupts drug production or patient care. Regulatory implications. | RM20M-200M |
| Power generation | Generator controls, switchgear, protection relays, SCADA, solar inverters | Grid control and protection systems are electronic. Failure causes cascading outage. | RM30M-300M |
| Chemical and process plants | DCS, safety instrumented systems (SIS), analysers, control valves | Electronic controls prevent runaway reactions. Failure creates safety and production risk. | RM50M-500M |
| Telecommunications | Base stations, core network equipment, fibre optic systems, satellite | Service level agreements require near-100% uptime. Equipment failure = SLA penalties. | RM20M-200M |
With Malaysia's data centre investment pipeline exceeding RM100 billion and the E&E sector accounting for 40% of national exports, EEI is one of the fastest-growing insurance classes in the Malaysian market.
EEI Coverage Structure
EEI policies typically have two sections, similar to IAR. Section I covers physical damage to the equipment itself. Section II covers the loss of revenue or increased costs when equipment damage interrupts your operations.
| Section | What It Covers | Sum Insured Basis | Key Consideration |
|---|---|---|---|
| Section I: Material Damage | Repair or replacement of damaged electronic equipment | Replacement value (new-for-old) | Include freight, installation, and commissioning costs. Technology changes may mean replacement with upgraded model. |
| Section II: Increased Cost of Working | Extra expenses incurred to maintain operations while equipment is being repaired or replaced | Estimated maximum additional cost | Covers temporary equipment hire, outsourcing processing, overtime. Indemnity period must match replacement lead time. |
| External Data Media | Cost of restoring data on storage media damaged by an insured event | Estimated restoration cost | Covers re-entry of data and programs. Does not cover the value of the data itself or intellectual property. |
Section II is particularly important for data centres where downtime costs thousands of ringgit per minute. A 12-hour outage at a colocation facility can generate SLA penalty claims exceeding the cost of replacing the failed equipment itself.
EEI Premium Factors
EEI premiums are market-rated, individually underwritten based on the equipment type, value, age, and operating environment. Rates vary significantly across equipment categories.
| Factor | How It Affects Premium | What Gets Better Rates |
|---|---|---|
| Equipment type and technology | Different equipment categories have different failure rates and repair costs | Modern, well-maintained equipment with proven reliability |
| Equipment age | Older equipment has higher failure rates. Some insurers decline equipment beyond 10-15 years. | Equipment within manufacturer's expected service life |
| Operating environment | Temperature, humidity, dust, vibration, and power quality affect failure rates | Climate-controlled rooms, clean power supply, dust-free environments |
| Maintenance regime | Preventive maintenance reduces failure frequency. Well-maintained equipment gets better terms. | Documented maintenance contracts, OEM service agreements, regular inspections |
| Power protection | Surge protection, UPS, and power conditioning reduce electrical damage risk | UPS systems, surge protectors, dual power feeds, power quality monitoring |
| Sum insured | Direct correlation. Higher total equipment value = higher premium. Rate may improve for large portfolios. | Larger portfolios may attract fleet discounts |
| Claims history | Past claims indicate future risk. Clean history improves terms. | 3-5 years claims-free record |
| Deductible level | Higher deductible = lower premium. Eliminates small nuisance claims. | Higher deductible appropriate for large equipment portfolios |
Indicative EEI Premium Ranges
| Equipment Category | Indicative Rate (% of Sum Insured) | Example: RM20M Portfolio |
|---|---|---|
| IT and data centre equipment | 0.15% - 0.35% | RM30,000 - RM70,000/year |
| Industrial control systems (PLCs, SCADA) | 0.20% - 0.40% | RM40,000 - RM80,000/year |
| Electrical switchgear and transformers | 0.10% - 0.25% | RM20,000 - RM50,000/year |
| Medical and laboratory equipment | 0.25% - 0.50% | RM50,000 - RM100,000/year |
| Semiconductor and cleanroom equipment | 0.15% - 0.30% | RM30,000 - RM60,000/year |
Talk to a P&E Insurance Specialist
Common EEI Exclusions
| Exclusion | What's Not Covered | Alternative |
|---|---|---|
| Wear and tear | Gradual deterioration, corrosion, normal ageing of components | Preventive maintenance programme |
| Consumables | Batteries, fuses, filters, bulbs, belts that are expected to be replaced periodically | Operating budget / maintenance contract |
| Aesthetic defects | Scratches, dents, discolouration that don't affect equipment function | Not insurable (cosmetic only) |
| Software and data | Data loss, software corruption, cyber attack (unless physical damage results) | Cyber insurance, backup and recovery systems |
| Earthquake | Seismic damage (standard exclusion across most property policies) | Earthquake extension (available at additional premium) |
| War and terrorism | Standard exclusion across all property policies globally | Terrorism pool (available in some markets) |
EEI Claim Scenarios
| Scenario | Equipment Affected | Section I (Damage) | Section II (Increased Cost) |
|---|---|---|---|
| TNB voltage spike damages server room UPS and three racks | UPS, servers, networking switches | RM800K equipment replacement | RM200K for emergency cloud migration and temporary equipment rental |
| PLC controller suffers internal short circuit, halting production line | PLC, HMI panel, VFDs | RM150K replacement (8-week lead time from Germany) | RM300K for overtime and outsourcing during downtime |
| Cooling failure in data hall causes server overheating damage | Servers, storage arrays, networking | RM2M equipment damage across 50+ servers | RM500K for temporary cooling and load redistribution |
| Contractor accidentally drops switchgear panel during maintenance | Medium voltage switchgear | RM400K panel replacement | RM100K for temporary power supply during replacement |
| Lightning-induced surge destroys wafer testing equipment | Semiconductor test systems | RM5M equipment (12-month replacement lead time) | RM3M for outsourced testing services during waiting period |
How EEI Fits Your P&E Programme
| Coverage Layer | What It Protects | Product |
|---|---|---|
| Property (external causes) | Buildings, machinery, stock against fire, flood, theft | IAR / Fire |
| Mechanical equipment (internal failure) | Motors, compressors, turbines, pumps, gearboxes | MB / MLOP |
| Electronic equipment (internal failure) | Servers, PLCs, switchgear, control systems, electronic instruments | EEI |
| Pressure equipment | Boilers, pressure vessels, steam equipment | BPV |
| Liability | Third-party bodily injury and property damage | CGL |
What Your Broker Needs to Quote EEI
| Information Required | Why Underwriters Need It |
|---|---|
| Complete equipment schedule (make, model, year, value per item) | Determines rate per equipment category and total premium |
| Equipment location and environment details | Climate-controlled rooms get better rates than open factory floors |
| Power supply details (UPS, surge protection, redundancy) | Clean, protected power supply significantly reduces premium |
| Maintenance contracts and service history | OEM maintenance contracts demonstrate professional equipment management |
| 3-5 year claims history | Past claims indicate future risk. Clean record improves terms. |
| Section II requirements (increased cost of working) | Sum insured, indemnity period, and cost estimates for temporary measures |
Frequently Asked Questions
What does EEI insurance stand for?
EEI stands for Electronic Equipment Insurance. It is a specialist engineering insurance policy that covers electronic and electrical equipment against sudden and unforeseen physical damage, including internal electrical and mechanical faults that other property policies exclude.
Is EEI the same as machinery breakdown insurance?
No. Machinery breakdown covers mechanical equipment like motors, compressors, pumps, and turbines. EEI covers electronic equipment like servers, PLCs, switchgear, and control systems. They are companion policies. A modern factory or data centre typically needs both machinery breakdown and EEI to cover the full range of equipment.
Does IAR cover electronic equipment?
IAR covers electronic equipment against external causes of damage (fire, flood, theft, accidental impact). But IAR excludes internal electrical and mechanical faults. If your server fails due to an internal short circuit or power board fault, IAR does not respond. EEI covers exactly this gap.
Do data centres need EEI insurance?
Yes. EEI is one of the most important coverages for data centre operations. Servers, storage systems, networking equipment, UPS, and cooling controls are all electronic equipment subject to internal failure. The entire data centre revenue model depends on equipment uptime. Internal electrical faults are the primary threat, not fire.
What is the increased cost of working section?
Section II covers the additional expenses you incur to maintain operations while damaged equipment is being repaired or replaced. This includes temporary equipment rental, cloud migration costs, outsourcing production, overtime, and emergency procurement. The indemnity period should match the longest equipment replacement lead time in your portfolio.
Does EEI cover data loss?
EEI covers the cost of restoring data on storage media that is physically damaged by an insured event (external data media extension). It does not cover the inherent value of data, intellectual property, or data loss from non-physical causes like cyber attacks or software bugs. Separate cyber insurance and backup systems are needed for comprehensive data protection.
How old can equipment be and still be covered by EEI?
Most insurers will cover equipment up to 10-15 years old, depending on the equipment type and maintenance history. Very old equipment may face higher deductibles, coverage restrictions, or declinature. Equipment under active OEM maintenance contracts is more likely to be accepted regardless of age.
Can I add EEI to my existing IAR policy?
Some insurers offer EEI as an extension to IAR for smaller equipment portfolios. For significant electronic equipment values (above RM5-10 million), a standalone EEI policy is recommended because it provides broader coverage terms, specialist underwriting, and dedicated claims handling for electronic equipment.
What deductibles apply to EEI?
Deductibles vary by equipment type and total portfolio value. Typical deductibles range from RM5,000-25,000 for standard equipment to RM50,000-100,000+ for high-value items. Higher deductibles reduce premium but mean you absorb smaller claims. Choose a deductible level that eliminates nuisance claims without leaving you exposed to significant losses.
How long does an EEI claim take to settle?
Small claims (single component failure, under RM100,000) typically settle within 1-2 months. Larger claims involving multiple equipment items or Section II (increased cost of working) can take 3-6 months. Equipment with long replacement lead times (semiconductor equipment, custom switchgear) may require interim payments while awaiting final settlement.
Conclusion
Electronic equipment is the backbone of modern industrial operations. Data centres, semiconductor fabs, automated factories, and process plants all depend on electronic systems that IAR and fire policies were never designed to cover. EEI fills this gap with specialist coverage for the internal faults, power events, and accidental damage that electronic equipment is actually exposed to.
Foundation structures EEI programmes for data centre operators, E&E manufacturers, automated factories, pharmaceutical facilities, and process plants across Malaysia. We understand how electronic equipment fails, what underwriters need to see, and how to structure Section II coverage to match your actual downtime costs.
Disclaimer
This page provides general guidance on Electronic Equipment Insurance available in the Malaysian market. Policy terms, conditions, exclusions, and availability vary by insurer and individual risk assessment. Premium indications are approximate and subject to underwriting. Always review your specific policy wording or consult a qualified insurance professional before making coverage decisions.
Get started
If you're managing a construction project, industrial facility, or commercial property in Malaysia and need insurance coverage, we can help structure a program that works.
We have a wide range of solutions
Let’s Work Together
If you're managing a construction project, industrial facility, or commercial property in Malaysia and need insurance coverage, we can help structure a program that works.
Foundation Insurance Solutions is a registered and licensed insurance intermediary in Malaysia specialising in property and engineering insurance for industrial operations. We provide comprehensive coverage for manufacturers, contractors, and facility owners across construction, electronics, food production, and high-risk industrial sectors.
Riskflow Sdn Bhd (202101001225):
Suite 3.19 (North Block), The Ampwalk, 218 Jalan Ampang, 50450 Kuala Lumpur, Wilayah Persekutuan Kuala Lumpur
t: +60149256398 (Kevin)
email: contact@getfoundation.com.my