Contract PCB Manufacturing & EMS Insurance

What is Contract PCB Manufacturing & EMS Insurance?

Like most manufacturing programmes, EMS insurance is a structured mix of covers — not a single policy. The difference is that EMS and contract PCB manufacturers often need additional attention around:

• Customer goods / goods held in trust – components and materials you do not own, but are responsible for while onsite.
• Products and completed operations – liability arising from boards/assemblies you supply into the supply chain.
• Process risk and “line-down” exposures – where a defect can trigger quarantine, rework and customer disruption.
• High-value plant – SMT lines, ovens, pick-and-place, AOI, X-ray, conformal coat, and test systems.
• Time-critical business interruption – short downtime can become expensive due to penalties and missed deliveries.
• Cyber/OT disruption – production depends on data, programming, traceability and systems integration.

A typical programme may include employers’ liability, public liability, products liability, property cover, business interruption, and machinery breakdown — with optional additions such as recall/rectification solutions, professional indemnity for technical advice, cyber and environmental liability depending on your exposures.

Who Needs EMS / Contract PCB Manufacturing Insurance?

This cover is relevant for contract manufacturers across the electronics supply chain, including businesses that provide PCB fabrication, PCB assembly, box build, cable/harness assembly, test services, and aftermarket repair/refurb. Underwriting varies significantly based on end-use sectors and the extent of design responsibility.

Typical insured operations include:

Key Risks in Contract PCB and EMS Operations

EMS risk is not just “manufacturing plus liability”. It has a distinct profile driven by customer goods, traceability expectations, and supply-chain consequences. Underwriters typically focus on five areas:

1) Customer-owned goods and materials

Many contract manufacturers store customer-supplied components, bare boards, and consignments onsite. If a fire, flood, theft, or contamination event damages those items, you could face contractual claims. Standard property policies may not automatically cover goods held in trust unless specifically arranged.

2) Process deviation and “escape” risk

If a solder profile is wrong, a component is misloaded, or programming/test data is incorrect, defective assemblies may ship before detection. The downstream costs can include quarantine, rework, and in some cases, field failures. Strong QA, traceability, and containment procedures can materially improve underwriting terms.

3) Product liability and completed operations

EMS businesses may carry products liability exposure for the assemblies they supply. Underwriters look at end-use sectors (automotive, aerospace, rail, medical, industrial controls, consumer electronics), export territories, and the potential severity of downstream damage. Where USA/Canada exposure exists, this must be declared and structured appropriately.

4) High-value equipment and critical utilities

SMT lines, reflow ovens, AOI, X-ray, selective solder, conformal coat systems and test rigs are high-value and can be single points of failure. Machinery breakdown and “loss of profits following breakdown” can be relevant when production relies on a small number of critical machines.

5) Business interruption and contractual timing risk

A short disruption can cause missed deliveries and expedited costs. Even where contractual penalties are not insured, BI cover helps protect gross profit and ongoing costs during recovery. The key is selecting an indemnity period that reflects realistic restart timelines, including re-qualification and customer approval.

Core Covers for Contract PCB Manufacturing & EMS

Employers’ Liability (EL)

Covers employee injury/illness allegations. For EMS, the exposure includes machinery operation, manual handling, soldering fumes, cleaning agents, repetitive strain, and general workplace injury risks.

Public Liability (PL)

Covers third-party injury/property damage arising from your premises/operations (e.g., visitor injury, contractor incidents, accidental damage during deliveries). Underwriters may ask about visitor controls, contractors, and site housekeeping.

Products Liability

Covers third-party injury or property damage caused by products you supply. The critical underwriting factors are sectors, territories, quality systems, and batch exposure. If you assemble for safety-critical sectors, insurers will expect robust process controls and traceability.

Property, Stock & Work-in-Progress

Covers buildings (if owned), contents, tooling, stock and WIP. For EMS, it’s important to correctly declare stock/WIP values and ensure the policy reflects the true nature of the operation (manufacturing, not “light assembly”).

Business Interruption (BI)

Protects gross profit and ongoing costs following insured disruption. EMS businesses often need BI that reflects short lead times and the reality that recovery may require re-qualification and customer approval, not just “reopen the doors”.

Machinery Breakdown (and breakdown BI)

Covers sudden breakdown of insured plant (and can sometimes be extended to loss of profits following breakdown). This can be crucial if a single SMT line, oven, compressor or test rig is a production bottleneck.

Customer Goods (Goods Held in Trust) – A Common EMS Requirement

One of the biggest differences in contract manufacturing is the presence of customer-owned goods onsite: components, bare boards, sub-assemblies, jigs, fixtures, and sometimes finished products awaiting dispatch. If these are damaged by fire, flood, theft or contamination, the customer may look to you for recovery.

Standard property policies do not always include customer goods automatically. A tailored programme should consider:

• Maximum value of customer goods onsite at any one time (including peak periods).
• Storage arrangements (segregated areas, racking, secure cages, humidity controls).
• Contract terms defining responsibility for loss and limits of liability.
• Perils most likely to affect goods (fire/smoke, escape of water, theft, accidental damage).

Getting this right protects relationships as well as finances. It also improves insurer confidence because it shows you understand your contractual exposure and have declared it properly.

Recall, Rectification & Field Failure Risk (When Products Liability Isn’t Enough)

Products liability usually responds to third-party injury or property damage. But EMS disputes often revolve around pure economic loss: rework, replacement, and line disruption costs where there is no injury or property damage. In those cases, a standard products liability policy may not respond.

Depending on your exposure, you may consider specialist solutions such as product recall/withdrawal or rectification-style cover. Underwriting will depend on your sectors, batch exposure, QA controls and traceability. The key is containment: how quickly can you identify affected lots and prevent further shipments?

Insurers will typically ask about:

• AOI/X-ray/e-test coverage and when it is performed
• Programming controls and revision management
• Traceability (components, batches, serialisation where used)
• Quarantine procedures and non-conformance escalation
• CAPA/root cause analysis and supplier controls

Even if you don’t buy recall-style cover, improving these controls can reduce overall liability pricing and improve insurer appetite.

Cyber & OT Risk for EMS Businesses

Contract manufacturers rely on data: customer designs, BOMs, programming, traceability logs, test data, and production scheduling. A ransomware event can stop production even if machines are physically intact. Many EMS businesses review cyber cover, especially where customers require security standards or where downtime could be severe.

Underwriters typically look for baseline controls: MFA, backups (with restore testing), patching, access control, and (where possible) segmentation between office IT and production OT.

Common Claims and Disputes in Contract Manufacturing

Scenario 1: Fire/smoke damage to customer goods

A small fire or smoke event contaminates customer-owned components and WIP. Property and BI cover may respond for your own losses, but customer goods require specific consideration. If goods held in trust are not included, you can be exposed to contractual claims.

Scenario 2: Wrong component fit causes batch rework

A pick-and-place feeder is loaded incorrectly, leading to a batch with wrong components. The issue is discovered at customer test stage. The dispute may revolve around rework and economic loss rather than property damage. Strong traceability, containment and (where arranged) recall/rectification solutions can help.

Scenario 3: Breakdown of critical equipment

A reflow oven or compressor fails, stopping production. Machinery breakdown can cover repair costs, and breakdown BI may cover certain loss of profits if included. Redundancy and spares strategy can improve insurer terms.

Scenario 4: Cyber disruption stops scheduling and test systems

Systems are locked by ransomware and production cannot access programmes, test procedures or dispatch documents. Cyber cover can provide incident response and certain downtime protection depending on policy terms.

Scenario 5: Downstream property damage allegation

A defective assembly causes overheating and damages other equipment. Products liability may respond to third-party property damage claims, subject to wording, territories and limits.

What Insurers Need to Quote EMS / Contract PCB Risks

Contract manufacturing underwriting moves faster and pricing improves when the information is clear. We typically ask for:

With the above, we can present your risk clearly to suitable markets and negotiate terms that match your operational reality.

Why Choose Insure24 for EMS / Contract PCB Insurance?

How to Get a Quote

EMS insurance pricing improves when your exposure is presented clearly: what you build, which sectors you supply, how you control defects, and what values you hold (including customer goods). We will guide you through the details insurers need.