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INSURANCE FOR WHEN YOUR SUPPLY CHAIN STOPS — AND SO DOES YOUR PRODUCTION
Why Electrical Manufacturers Are Vulnerable to Supply Chain Disruption
Electrical and electronic component manufacturing depends on a web of specialist suppliers: semiconductors, PCB laminate, connectors, copper, rare earth materials, resins, conformal coatings, transformers, relays, sensors, packaging, test fixtures and calibration services. A single missing part can stop an entire build schedule—especially where you operate “just in time” production or supply OEM customers with strict delivery windows.
The financial impact is rarely limited to one late shipment. It can include lost turnover, overtime to catch up, expediting costs, customer chargebacks, cancelled contracts, and reputational damage. Standard business interruption (BI) often only responds when your own premises suffer insured damage (e.g., fire or flood). Contingent BI and supply chain extensions are designed to address disruption that happens outside your premises—at a key supplier, a critical customer, or a dependency site.
What is Supply Chain & Contingent Business Interruption (CBI) Insurance?
Supply chain insurance is a broad term used to describe cover that protects your business when disruption occurs in your upstream or downstream network. Contingent Business Interruption (CBI) is a common structure within this, typically designed to protect your gross profit and ongoing expenses when a named or key supplier or customer suffers an insured event that interrupts your ability to trade.
The key detail is what “trigger” is covered. Many CBI policies mirror the triggers in your own BI policy (for example, a fire at a supplier’s premises). Others can be tailored to reflect specific vulnerabilities, depending on the insurer and underwriting appetite. Insure24 helps you structure cover realistically so it responds to the events that would genuinely hurt your production.
What It Can Cover (Typical Structure)
- Loss of gross profit due to interruption at a key supplier or customer (subject to triggers)
- Increased cost of working (outsourcing, expediting, temporary production solutions)
- Dependency on single-source materials or specialist services
- Named supplier / customer extensions (Tier 1, Tier 2 supply chain dependency)
- Denial of access (where an insured incident restricts access to a dependency site)
- Loss following damage at contract manufacturers or third-party processors (where included)
- Longer indemnity periods aligned to requalification and ramp-up time
What Electrical Manufacturers Commonly Depend On
- Semiconductor supply (chips, microcontrollers, power modules, ICs)
- PCB laminate / substrate and specialist board fabrication capacity
- Copper / conductor supply and connector manufacturers
- Transformers, relays, contactors, switchgear sub-components
- Specialist coatings, resins, potting compounds and adhesives
- Calibration services and test equipment providers
- Logistics routes and freight dependencies for time-critical parts
Why Standard Business Interruption Often Isn’t Enough
Traditional BI is designed around damage at your premises. If your factory suffers a fire, flood or insured breakdown event, BI can protect your gross profit while you recover. But if your factory is intact and you cannot manufacture because a supplier can’t deliver, standard BI may not respond.
Electrical manufacturers are particularly exposed because production tends to rely on specialist components with long lead times. A supplier interruption can quickly create backlogs, missed OEM delivery windows and contractual consequences. Contingent BI and supply chain extensions are used to close that gap—where insurable and properly structured.
Typical Supply Chain Claim Triggers
- Fire, explosion or storm damage at a key supplier’s premises
- Flood damage affecting a dependency site (supplier or critical customer)
- Machinery breakdown at a contract manufacturer or key processing plant (where included)
- Denial of access following an insured incident near a supplier location
- Damage at a utilities provider causing extended outage (where endorsed)
- Cargo loss or transit delay for critical inbound shipments (where insured)
- Supplier insolvency (sometimes considered, often requires different solutions)
Common “Hidden” Costs of Disruption
- Overtime and second shifts to catch up production
- Expedited freight and premium shipping to keep lines moving
- Scrap / rework due to rushed substitutions or part changes
- Rescheduling and production planning costs
- OEM chargebacks, line stoppage claims and contractual penalties (where applicable)
- Loss of key contracts due to persistent failure to deliver
- Requalification / retesting delays when changing suppliers
Contingent BI is Underwritten on Detail
Insurers typically require you to identify your key or named suppliers/customers. The most effective CBI programmes are targeted: focusing on the single-source chip supplier, the unique PCB fab partner, the specialist connector manufacturer, or a Tier 1 customer who represents a large share of turnover. The clarity of your dependency map often determines whether cover is available—and on what terms.
How to Structure Supply Chain & Contingent BI Cover Properly
There is no one-size-fits-all supply chain policy. The best structure depends on what would actually stop your production, how quickly you can substitute suppliers, and the financial impact of delay. We help manufacturers build a practical solution using a mix of BI, CBI, increased cost of working, stock and transit protections, and (where appropriate) contract risk management.
The goal is to protect your ability to keep paying wages and overheads, preserve gross profit, and fund the cost of “workarounds” while production resumes—without creating a policy that is too broad to be insurable or too narrow to be useful.
Key Policy Elements We Set With You
- Dependency schedule: named suppliers/customers and what they provide
- Indemnity period: realistic time to restore supply and ramp production
- Sum insured: gross profit, standing charges and realistic loss scenario
- Trigger events: what events at suppliers/customers are covered
- Increased cost of working: outsourcing, expediting, alternate routes
- Waiting period: time deductible before cover responds
- Territories: overseas suppliers and jurisdiction considerations
Practical Questions We’ll Ask
- Which parts are single-source or long lead time?
- How many weeks of buffer stock do you hold?
- Can you substitute components without requalification?
- What is your largest customer dependency (turnover %)?
- Do OEM contracts include line-stoppage or late-delivery clauses?
- Do you rely on third-party testing/calibration to ship product?
- Where are your key suppliers located (UK/EU/Asia/USA)?
Indemnity Period Tip (Electrical Manufacturing)
If you need to change a critical supplier, the timeline often includes qualification, sample runs, test validation, customer approval and ramp-up. That’s why a short indemnity period can be a false economy. We’ll help you select an indemnity period that matches your “time to recover”, not just “time to find an alternative”.
When a key overseas supplier suffered a fire and lead times doubled overnight, Insure24 helped us structure cover around our true dependencies. We protected cashflow and funded alternative sourcing while we ramped back up.
Operations Director, UK Electronics ManufacturerReducing Supply Chain Risk (And Improving Insurance Terms)
Insurers reward resilience. Even if you still want protection, demonstrating that you manage dependencies can improve pricing and broaden available cover. Supply chain risk is best managed through a combination of operational controls and targeted insurance.
Controls That Improve Underwriting
- Dual sourcing / approved alternates for critical parts
- Safety stock policies aligned to lead times and risk
- Supplier audits and financial monitoring (where appropriate)
- Documented substitution and requalification process
- Supplier contracts with clear delivery and escalation terms
- Dependency mapping and regular review of “single points of failure”
- Business continuity plan that includes supplier failure scenarios
Practical BI / CBI Readiness Steps
- Maintain up-to-date BI gross profit calculations
- Identify and document named suppliers/customers for CBI schedules
- Track lead times and requalification timelines for critical parts
- Pre-negotiate alternative logistics and freight options
- Document outsourcing options and “increased cost of working” routes
- Keep accurate stock records and WIP reporting
- Store key customer contracts and penalty terms centrally
FREQUENTLY ASKED QUESTIONS
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What is contingent business interruption (CBI)?
CBI is business interruption cover triggered by an insured event at a key supplier or key customer (rather than at your own premises),
which prevents you from trading. The covered triggers and dependency schedule depend on the policy wording and underwriting.
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Does CBI cover supplier delays due to shortages or shipping congestion?
Often not under standard BI-style triggers. Many CBI policies respond to insured physical damage (e.g., fire) at a supplier’s premises.
Broader non-damage supply chain triggers are sometimes available but are highly insurer-dependent and must be structured carefully.
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How do I choose the right indemnity period?
The indemnity period should reflect the time it would take to restore supply and return to normal production levels—including
requalification and customer approvals if you need to change suppliers. Many manufacturers underestimate this timeline.
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Do I need to name suppliers to get contingent BI cover?
In many cases, yes. Insurers usually want a schedule of key suppliers/customers and the dependency exposure. Some policies allow a
limited number of “unnamed” dependencies, but named schedules typically provide clearer coverage.
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What cover helps with expediting costs to keep production running?
“Increased cost of working” can help fund reasonable additional costs incurred to reduce the loss (for example, outsourcing,
expedited freight or alternative manufacturing routes), subject to policy terms and the BI/CBI trigger.
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How long does it take to get a quote for supply chain / CBI cover?
Supply chain and CBI underwriting is detail-driven. As a guide, allow around 1–2 working days once key dependency and BI information
is available, while we present your risk to specialist underwriters and negotiate terms.
UNIQUE INSURANCE
TAILORED FOR YOU
If your electrical component manufacturing business depends on specialist suppliers or OEM delivery windows, supply chain disruption can be as damaging as a fire at your own premises. Speak to Insure24 and we’ll help you structure practical BI, contingent BI and dependency cover to protect turnover and fund recovery when disruption hits.
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