Erection All Risks (EAR) Insurance Malaysia
Specialised coverage for machinery installation, erection, testing, and commissioning projects. Protects against physical damage during the most vulnerable phase of plant and equipment setup.
Our Specialisation
Property & Engineering Specialists
Technical Risk Understanding
Malaysian & Regional Markets
The most dangerous moment for any piece of industrial machinery is when it's being installed and tested for the first time. A generator running at full load during commissioning. A production line being stress-tested before handover. A transformer energised for the first time on site. If something fails during testing, the damage can be catastrophic and standard CAR insurance won't cover it.
Erection All Risks (EAR) insurance is designed specifically for machinery installation, erection, and commissioning projects. It covers the unique risks that occur when equipment moves from delivery to full operation, including the testing phase that CAR insurance excludes.
This page covers:
- What EAR covers that CAR doesn't
- Types of projects that need EAR
- EAR vs CAR: when to use which policy
- Testing and commissioning coverage explained
- Premium factors and what drives cost
- Common claim scenarios
- How EAR fits into your project insurance programme
What Does EAR Insurance Cover?
Like CAR insurance, EAR is structured in sections. But EAR's coverage is tailored for the specific risks of installing, erecting, and commissioning machinery and equipment.
| Section | What It Covers | Key Difference from CAR |
|---|---|---|
| Section I: Erection Works | Sudden and unforeseen physical loss or damage to machinery/equipment being erected, installed, and commissioned | Includes full testing and commissioning coverage as standard |
| Section II: Third-Party Liability | Legal liability for bodily injury or property damage to third parties during installation | Same structure as CAR Section II |
| Section III: Existing Property | Damage to the principal's existing property at or near the installation site | Especially important since erection often occurs inside operating facilities |
Testing and Commissioning: Where EAR Shines
This is the single most important reason EAR exists as a separate product. Testing and commissioning is when machinery is most vulnerable to damage. Equipment running for the first time under load can fail due to manufacturing defects, alignment issues, electrical faults, or vibration problems that weren't apparent during static installation.
| Testing Phase | What Happens | Common Risks |
|---|---|---|
| Cold commissioning | Mechanical checks, alignment verification, control system testing without live process | Alignment failures, wiring errors, control logic faults |
| Hot commissioning | Equipment running with process materials at partial or full capacity | Overheating, vibration damage, bearing failures, electrical burnout |
| Performance testing | Equipment tested at full rated capacity against performance specifications | Capacity exceedance, stress failures, system integration issues |
| Load testing | Transformers, generators, switchgear tested at rated load | Transformer failure, generator winding damage, switchgear arc flash |
CAR insurance provides only limited testing coverage (structural testing), not the full mechanical and electrical testing that machinery requires. If a transformer fails during energisation or a production line motor burns out during commissioning, CAR won't cover it. EAR will.
EAR vs CAR: When to Use Which Policy
The distinction is straightforward but getting it wrong leaves gaps.
| Feature | CAR (Contractor's All Risks) | EAR (Erection All Risks) |
|---|---|---|
| Project type | Building, civil engineering, infrastructure | Machinery installation, plant erection, commissioning |
| Typical projects | Factories, warehouses, roads, bridges, housing | Production lines, boilers, turbines, solar farms, substations, data centre equipment |
| Testing coverage | Limited to structural testing only | Full testing and commissioning coverage included |
| Key risk | Natural perils (flood, fire, storm), theft, collapse | Testing damage, mechanical failure during commissioning, electrical fault |
| Existing property | Section III covers surrounding property | Section III covers existing property at site (critical for installations in operating plants) |
| Maintenance period | Defects liability period (typically 12 months) | Guarantee/warranty period (typically 12 months) |
| Contract forms | PAM, PWD, CIDB, FIDIC Red Book | IEM, FIDIC Yellow Book, MechE/IEE forms |
Mixed projects need both. A new factory building with a production line installation typically requires CAR for the building shell and civil works, plus EAR for the machinery installation and commissioning. EPC (Engineering, Procurement, Construction) projects under FIDIC Yellow Book often require a combined CAR+EAR programme to cover the full project lifecycle.
Who Needs EAR Insurance?
| Party | Why EAR Is Needed | Typical Projects |
|---|---|---|
| M&E contractors | Installation works exposure, testing liability for installed systems | ACMV installation, electrical systems, fire protection systems |
| EPC contractors | Turnkey responsibility from design through commissioning | Factory fit-outs, data centre builds, power plants |
| Equipment suppliers/OEMs | Equipment value at risk during installation and testing by supplier's engineers | Turbine installation, production line setup, boiler erection |
| Plant owners/operators | Protecting investment in new equipment during the installation phase | Factory expansion, line upgrades, new facility equipment |
| Solar/renewable energy developers | Panel installation, inverter commissioning, grid connection testing | Large-scale solar farms (LSS), rooftop solar systems |
| Data centre builders | Critical equipment (UPS, generators, cooling) must be tested before handover | Server hall fit-out, power and cooling infrastructure |
Malaysia's data centre construction boom is creating significant EAR demand. Every data centre project involves installing and commissioning transformers, UPS systems, generators, precision cooling units, and electrical switchgear. Each component must be tested at rated load before the facility can accept tenants. EAR covers this entire testing phase.
Premium Factors for EAR Insurance
| Factor | Impact | What Underwriters Assess |
|---|---|---|
| Equipment value (sum insured) | Direct: premium based on total value of equipment being erected | Equipment purchase price + installation costs + freight |
| Equipment type and technology | High: complex/novel equipment attracts higher rates | Proven vs prototype technology, manufacturer reputation |
| Testing/commissioning complexity | High: the testing phase is the highest-risk period | Type of testing, duration, whether done in stages or single event |
| Erection contractor experience | Medium-high: experienced erectors reduce risk | Track record with this equipment type, qualifications, claims history |
| Installation location | Medium: operating plants carry higher risk than greenfield sites | Greenfield vs brownfield, proximity to existing operations |
| Project duration | Medium: longer erection period = more exposure | Erection period + testing period + guarantee period |
EAR rates are generally higher than CAR rates because testing and commissioning risks are concentrated and can result in expensive single-event losses. Typical EAR rates range from 0.20% to 0.50% of equipment value, but rates for power generation equipment, large transformers, or novel technology can be higher.
Get an EAR quotation for your installation project
Common EAR Claim Scenarios
| Scenario | What Happened | EAR Response |
|---|---|---|
| Transformer failure during energisation | Internal winding fault caused transformer to fail at first full-load test | Section I: damage to connected switchgear and bus bars (defective transformer itself may be excluded as manufacturer's defect) |
| Production line motor burnout | Drive motor overheated during commissioning run, damaging the motor and adjacent conveyor section | Section I: damage to surrounding equipment from the failure event |
| Crane drop during lifting | Heavy machinery piece dropped during lifting and positioning, destroying the equipment and damaging floor slab | Section I: damage to equipment + Section III: damage to existing building structure |
| Boiler tube failure | Steam boiler tube ruptured during hydrostatic pressure testing | Section I: reinstatement of damaged boiler components |
| Vibration damage | Improperly balanced rotating equipment caused foundation bolts to shear, equipment fell from mounting | Section I: equipment repair + foundation repair |
| Fire during welding | Hot works during pipe installation ignited insulation material in existing plant area | Section I: damage to erection works + Section III: damage to existing plant property |
EAR Extensions
| Extension | What It Adds | When You Need It |
|---|---|---|
| Guarantee/warranty period | Coverage continues during post-handover warranty period for erection-related damage | Always. Standard 12-month warranty coverage |
| Debris removal | Cost to remove damaged equipment and debris after a loss event | Always. Heavy machinery removal can be extremely expensive |
| Express freight / airfreight | Expedited shipping of replacement equipment or parts | Time-critical installations with contractual deadlines |
| Overtime and holiday working | Extra labour costs to accelerate repair/replacement | Projects with tight commissioning deadlines |
| Off-site storage | Equipment stored at warehouse or staging area before delivery to site | When equipment is delivered ahead of installation schedule |
How EAR Fits Your Project Insurance Programme
EAR is one component of a comprehensive project insurance programme. Here's how it interacts with other policies.
| Risk | Coverage |
|---|---|
| Building/civil works construction | CAR insurance covers the building shell, foundations, civil works |
| Machinery installation and commissioning | EAR covers equipment from delivery through to successful testing |
| Design error in equipment specification | SPPI covers financial losses from professional negligence in design |
| Revenue loss from delayed commissioning | DSU (Delay in Start-Up) covers financial losses from project delays caused by insured damage |
| Worker injury during installation | Workmen Compensation covers medical and compensation |
| Equipment in operation after handover | Machinery Breakdown / MLOP takes over once equipment is accepted and operational |
The handover from EAR to operational insurance is a critical transition. Once equipment passes commissioning tests and is accepted by the owner, EAR coverage ends (except for the guarantee period). At that point, IAR and Machinery Breakdown insurance should be in place to cover the operational phase. A gap between EAR expiry and operational cover start date leaves the equipment uninsured.
FAQ
What's the difference between EAR and CAR insurance?
CAR covers building and civil engineering construction. EAR covers machinery installation, erection, and commissioning. The critical difference is that EAR includes full testing and commissioning coverage, while CAR only covers structural testing. If your project involves installing and testing equipment, you need EAR.
Can I use CAR insurance for a machinery installation project?
CAR is not designed for machinery installation risks. It doesn't cover damage during testing and commissioning, which is the highest-risk phase of any installation project. Using CAR for an erection project leaves a significant coverage gap during the most expensive part of the project.
Does EAR cover equipment already in operation at the site?
No. EAR covers equipment being erected and commissioned. Existing operational equipment is covered by IAR or Machinery Breakdown insurance. However, EAR Section III can cover damage to existing property at the installation site caused by the erection works.
What happens when a defective piece of equipment fails during testing?
EAR covers damage resulting from the failure to other equipment and property. The defective item itself may be excluded under the manufacturer's defect clause. The manufacturer's warranty typically covers the defective item, while EAR covers the consequential physical damage to surrounding equipment and structures.
Do I need both CAR and EAR for a new factory project?
Usually yes. CAR covers the building construction (foundations, structure, envelope). EAR covers the production line installation, electrical systems, and commissioning. Some insurers offer combined CAR+EAR policies for turnkey projects. Your broker should structure the programme based on the project's specific scope.
How does EAR cover data centre equipment installation?
Data centre projects involve high-value equipment (transformers, UPS systems, generators, precision cooling units) that must be installed and tested at full rated capacity. EAR covers this entire process. Given the revenue impact of delayed data centre commissioning, DSU insurance is often placed alongside EAR for DC projects.
Is EAR more expensive than CAR?
Generally yes. EAR rates (0.20% to 0.50% of equipment value) tend to be higher than CAR rates (0.15% to 0.35% of contract value) because testing and commissioning risks are concentrated and can result in expensive single-event losses. However, EAR premiums are based on equipment value, which may be lower than total construction contract value.
How long does EAR coverage last?
EAR covers the erection period (installation and commissioning) plus a guarantee/warranty period, typically 12 months after successful commissioning and handover. The total policy period is usually specified in the contract. If the installation overruns, you must extend the policy before the original period expires.
What information do I need for an EAR quotation?
Equipment list with values, project description and scope, installation methodology, testing and commissioning plan, erection period, guarantee period, location details, and the erection contractor's experience and claims history. The more detail you provide upfront, the faster and more accurate the quotation.
When should I transition from EAR to operational insurance?
Immediately upon successful commissioning and acceptance. There should be no gap between EAR expiry and the start of IAR and Machinery Breakdown coverage. Your broker should coordinate the transition dates. The EAR guarantee period provides overlap during the warranty phase.
Foundation Conclusion
EAR insurance protects the most vulnerable phase of any equipment's lifecycle: the moment it moves from a crate to an operating system. Testing and commissioning failures can destroy millions in equipment value in seconds, and standard CAR insurance won't cover it.
Foundation places EAR programmes for M&E contractors, EPC firms, equipment suppliers, and plant owners across Malaysia. From production line installations to data centre fit-outs to power plant commissioning, we structure coverage that protects the full erection and testing lifecycle.
Talk to Foundation about EAR insurance for your installation project
Disclaimer: This page provides general guidance on insurance coverage available in the Malaysian market. Policy terms, conditions, and availability vary by insurer. Always review your specific policy wording or consult a qualified insurance professional before making coverage decisions.
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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