Aerospace Power Unit Production Manufacturing Insurance (UK): A Practical Guide

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Aerospace Power Unit Production Manufacturing Insurance (UK): A Practical Guide

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Aerospace Power Unit Production Manufacturing Insurance (UK): A Practical Guide

Introduction

If you manufacture aerospace power units—whether you’re producing auxiliary power units (APUs), power management modules, starter-generators, fuel control components, or sub-assemblies—you’re operating in one of the most demanding risk environments in UK manufacturing. Tolerances are tight, traceability is non-negotiable, and a single defect can trigger costly rework, grounded aircraft, contractual penalties, and reputational damage.

The right insurance programme isn’t just “a policy for the factory.” It’s a joined-up set of covers that protects your balance sheet across design responsibility, production, testing, storage, transit, and post-delivery liabilities—aligned with the way aerospace contracts and quality systems actually work.

This guide explains the main risks in aerospace power unit production and the insurance covers UK manufacturers typically need, plus practical steps to reduce claims and keep premiums under control.

What counts as “aerospace power unit production” for insurance purposes?

Insurers will usually class you as aerospace manufacturing if you:

  • Manufacture APUs, starter-generator systems, power conversion units, power distribution units, or related electromechanical assemblies

  • Machine or fabricate critical parts (e.g., turbine housings, shafts, casings, brackets) to aerospace specifications

  • Assemble, test, calibrate, or overhaul power unit sub-systems

  • Supply to OEMs, Tier 1/Tier 2 suppliers, MROs, or defence/aerospace programmes

  • Hold aerospace quality certifications (e.g., AS9100) or operate under strict customer quality clauses

Even if you only make a “small component,” your contractual liability can be large—especially where your part is safety-critical or drives aircraft availability.

Key risks in aerospace power unit manufacturing

A good insurance programme starts with a clear view of where losses actually happen.

1) Product and completed operations liability

If a manufactured component fails in service, claims can include:

  • Damage to other aircraft parts (consequential physical damage)

  • Third-party property damage

  • Bodily injury (rare but severe)

  • Legal defence costs and expert evidence

Aerospace supply chains also create “aggregation risk”: one batch issue can affect many units, leading to multiple claims.

2) Design responsibility and specification errors

Many manufacturers take on some design responsibility—through design-for-manufacture input, material selection, tolerance recommendations, or changes requested by the customer.

If an error is “professional” in nature (design/specification/advice), it may fall under Professional Indemnity (PI) rather than Public/Product Liability.

3) Recall, rework, and “grounding” costs

A defect might not cause injury or physical damage, but it can still be financially catastrophic if it triggers:

  • Product recall

  • Removal and replacement

  • Rework and retesting

  • Customer line-stoppage

  • Aircraft on ground (AOG) costs and contractual penalties

Standard liability policies often do not cover pure recall/rework costs unless you buy specific extensions.

4) Contractual liability and tough aerospace terms

Aerospace contracts can include:

  • Broad indemnities

  • Fitness for purpose wording

  • Liquidated damages

  • Warranty and performance guarantees

  • “Hold harmless” clauses

  • Requirements to name customers as additional insureds

Insurance won’t automatically cover every contractual promise you sign. You need policy wording that matches your contract profile.

5) Property damage and machinery breakdown

Your biggest loss may be inside your own facility:

  • Fire, flood, theft, and malicious damage

  • Damage to CNC machines, test rigs, ovens, autoclaves, calibration equipment

  • Electrical surge affecting sensitive electronics

  • Breakdown of compressors, chillers, and power supplies

A single machine failure can also trigger missed delivery dates and business interruption.

6) Business interruption (BI)

BI covers lost gross profit and increased cost of working after insured property damage. For aerospace power unit production, the real BI drivers include:

  • Long lead times for replacement machinery

  • Specialist tooling and fixtures

  • Customer audits and requalification after a major incident

  • Single-source suppliers for critical materials

7) Cyber and operational technology (OT) disruption

Aerospace manufacturing is increasingly digital:

  • ERP/MRP systems

  • CAD/CAM

  • CNC network connectivity

  • Quality management systems and traceability databases

A ransomware event can stop production, corrupt design files, and create traceability gaps that force scrappage.

8) Transit and storage risks

High-value components are vulnerable in transit:

  • Shock/vibration damage

  • Temperature/humidity exposure

  • Misdelivery and theft

  • Customs delays (if exporting)

If you store customer-owned goods or high-value stock, you also need the right “goods in trust” and stock limits.

9) Employers’ liability and workplace safety

Manufacturing risks include:

  • Manual handling injuries

  • Exposure to oils, solvents, metalworking fluids

  • Noise and vibration

  • Hot works and welding

  • Forklift and vehicle movements

Employers’ Liability (EL) is compulsory in the UK for most employers, but limits and risk management still matter.

Core insurance covers to consider

Below is a typical “stack” for aerospace power unit production manufacturers. The right mix depends on your contracts, turnover, export profile, and whether you hold design responsibility.

1) Employers’ Liability (EL)

  • What it covers: Injury/illness claims from employees arising out of work.

  • Typical limit: Often £10m (legal minimum is £5m, but many buyers carry £10m).

  • Key considerations: Labour-only subcontractors, agency staff, and site work at customer premises.

2) Public & Products Liability (PL/Products)

  • What it covers: Third-party injury/property damage caused by your operations or products.

  • Why it matters: Aerospace claims can be high severity.

  • Key considerations: Worldwide territory, jurisdiction clauses (especially if supplying into the US), and “completed operations” coverage.

3) Professional Indemnity (PI)

  • What it covers: Claims arising from professional services—design, specification, advice, testing, certification support, and sometimes software/firmware elements.

  • Why it matters: Many aerospace disputes are framed as “failure to meet spec” or “negligent advice,” not just physical damage.

  • Key considerations: Contractual liability, fitness for purpose, and the retroactive date.

4) Product recall / rectification extensions

  • What it covers: Costs to withdraw, repair, replace, or rectify products due to defects.

  • Why it matters: Recall and rework can dwarf liability claims.

  • Key considerations: Trigger wording (actual vs suspected defect), inclusion of third-party recall costs, and whether “your own work” is covered.

5) Property insurance (buildings, contents, stock)

  • What it covers: Physical loss/damage to premises, equipment, and stock from insured perils.

  • Key considerations: Correct sums insured, high-value items, and special perils (flood, theft, accidental damage).

6) Machinery breakdown (engineering insurance)

  • What it covers: Sudden and unforeseen breakdown of machinery and electrical equipment.

  • Why it matters: CNC and test equipment failures are common and expensive.

  • Key considerations: Inspection regimes, maintenance logs, and whether consequential damage is included.

7) Business interruption (BI)

  • What it covers: Loss of gross profit and increased cost of working after insured property damage.

  • Key considerations: Indemnity period (often 12–24 months for specialist manufacturing), and accurate gross profit calculations.

8) Cyber insurance

  • What it covers: Incident response, ransomware, business interruption, data restoration, and liability.

  • Key considerations: OT exposure, backups, MFA, and supplier access controls.

9) Goods in transit / marine cargo

  • What it covers: Loss/damage to goods while being transported.

  • Key considerations: High-value single shipments, courier vs specialist freight, and packaging requirements.

10) Directors’ & Officers’ (D&O)

  • What it covers: Claims against directors for management decisions.

  • Why it matters: Aerospace contracts and regulatory expectations can raise governance risk.

11) Legal expenses

  • What it covers: Legal costs for certain disputes (employment, contract, tax investigations) depending on the policy.

Common exclusions and “gotchas” to watch

Aerospace manufacturing claims often fall into grey areas. Common problem points include:

  • Your own product/workmanship exclusions: Liability may cover damage caused by your product, but not the cost to replace your product itself.

  • Recall/rework excluded unless added: Many policies exclude recall and rectification by default.

  • Contractual liability limits: If you agree to liabilities beyond negligence (e.g., fitness for purpose), insurers may not follow.

  • Known defects and prior circumstances: Anything you knew (or should have known) before policy inception may be excluded.

  • US/Canada jurisdiction: Some policies restrict cover for US exposure or require specific endorsements.

  • Aviation-specific exclusions: Some general liability policies exclude aviation risks entirely—this must be checked carefully.

Compliance, standards, and why insurers care

Insurers price aerospace risks based on process control and traceability. Expect questions about:

  • Quality management: AS9100/ISO 9001 certification, internal audits, corrective actions

  • Traceability: Batch/serial tracking, material certs, retention periods

  • Testing and calibration: Calibration schedules, UKAS calibration, documented test procedures

  • Supplier management: Approved supplier lists, incoming inspection, counterfeit parts controls

  • Change control: Engineering change notices (ECNs), deviation permits, concession processes

  • Training and competence: Operator sign-off, welding qualifications, inspection competence

You don’t need to be perfect, but you do need to be consistent—and able to evidence it.

How to reduce premiums (and reduce claims)

Insurers respond well to practical controls that reduce frequency and severity.

Strengthen traceability and batch control

  • Serialise critical components where feasible

  • Keep material certificates and inspection records accessible

  • Define retention periods that match contract requirements

Tighten inspection and test regimes

  • Clear first article inspection (FAI) processes

  • Documented in-process checks

  • Independent final inspection for critical parts

Improve contract review

  • Formal sign-off on indemnities, liquidated damages, and warranty clauses

  • Align your insurance limits with worst-case contractual exposure

  • Avoid “fitness for purpose” where possible; prefer “reasonable skill and care”

Protect the factory

  • Fire risk assessments, hot works permits, housekeeping

  • Intruder alarms and access control

  • Electrical testing and surge protection for sensitive equipment

Cyber hygiene for manufacturing

  • MFA, least-privilege access, and segregated networks for OT

  • Offline backups and tested restores

  • Supplier access controls and monitoring

What insurers will ask you (prepare these answers)

When you’re arranging or renewing cover, be ready with:

  • Turnover split (UK/EU/US/ROW) and customer types (OEM/Tier 1/MRO)

  • Products manufactured and whether they are safety-critical

  • Design responsibility (yes/no, and what scope)

  • Claims history and any known issues/near misses

  • Quality certifications and audit outcomes

  • Maximum value any one product/shipment

  • Contractual requirements (limits, additional insureds, recall clauses)

  • Details of testing, calibration, and traceability systems

The more clearly you can present this, the easier it is to get broad cover at a fair price.

Choosing limits: a practical way to think about it

There’s no universal “right” limit. A sensible approach is to model:

  • Worst-case third-party damage scenario (including legal costs)

  • Maximum batch exposure (how many units could be affected by one defect)

  • Maximum contractual penalties you could realistically face

  • Your balance sheet tolerance (what loss could you survive without threatening the business)

If you’re supplying into the US, limits and wording become even more important.

Claims scenarios (realistic examples)

Here are typical scenarios that show why policy structure matters:

  1. Batch defect discovered at customer incoming inspection: Customer demands rework and expedited replacement. Standard product liability may not pay “your own work” costs—recall/rectification cover may be needed.

  2. Test rig calibration error: Units pass testing but later fail in service. This may trigger PI (negligent testing) as well as products liability.

  3. Fire in the machining area: Property claim plus BI for months due to long lead times on replacement CNC equipment.

  4. Ransomware locks your ERP and traceability system: Production stops; you can’t evidence compliance for shipped units, forcing quarantines and retesting.

  5. Transit damage to high-value assembly: Goods in transit cover responds, but only if packaging and declared values meet policy conditions.

Quick checklist: aerospace power unit production insurance

Use this as a starting point when reviewing your programme:

  • EL in place and meets customer limit requirements

  • PL/Products includes completed operations and aviation risks (no hidden exclusions)

  • PI covers your design/testing/advice scope with an appropriate retro date

  • Recall/rectification considered (especially for batch exposure)

  • Property sums insured accurate; stock and customer goods included

  • Machinery breakdown added for CNC/test equipment

  • BI indemnity period realistic (often 18–24 months)

  • Cyber cover aligned to OT/production reality

  • Transit cover matches shipment values and routes

  • Contract review process documented and followed

Final thoughts

Aerospace power unit production is high-stakes manufacturing: complex supply chains, strict quality expectations, and potentially severe downstream consequences. The right insurance programme should mirror your real risk profile—products, design responsibility, testing, traceability, and contractual exposure—so a single incident doesn’t become an existential event.

If you’d like, tell me what you manufacture (APU assemblies vs components), whether you export to the US, and whether you provide any design/testing services. I can help you shape the exact cover list and the key wording points to ask for at renewal.

Call to action

Need aerospace manufacturing insurance that matches your contracts and quality obligations? Speak to a specialist broker who understands UK aerospace supply chains, product liability, and design responsibility—so you can quote, build, and deliver with confidence.

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