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ESD DAMAGE INSURANCE THAT HELPS YOU TAKE OFF
Why ESD Risk is a Serious Exposure in Semiconductor Manufacturing
Electrostatic discharge (ESD) is one of the most common — and most underestimated — causes of semiconductor and electronics product failure. A tiny static discharge, often not felt by the operator, can damage sensitive components, degrade performance, or create a latent defect that only appears after the device is installed in the field.
ESD is particularly relevant in clean manufacturing environments because handling occurs across multiple stages: wafer processing, dicing, die attach, wire bonding, packaging, test, inspection, kitting, PCBA assembly, conformal coating, and final pack-out. The more touch-points you have, the greater the probability of an ESD event without robust controls.
The insurance challenge is that ESD often presents as a quality problem rather than an obvious “damage event”. Losses can appear as scrap and rework, rejected batches, customer chargebacks, warranty returns, and sometimes product recall action. Insure24 helps you structure cover that reflects how ESD losses arise — and how to present your controls to insurers to improve terms.
What ESD & Static Discharge Damage Insurance Can Cover
ESD-related losses can involve multiple insurance sections, depending on what actually happens and how the loss is categorised. Some losses fall under product liability or recall; others are captured under property/engineering if a sudden incident causes physical damage to equipment; and some are addressed through specialist extensions such as product guarantee, quality assurance or rework cover (availability and scope vary by insurer).
The key is to design your programme around realistic scenarios: (1) internal scrap/rework and investigation costs, (2) third-party claims after shipment, and (3) time-element impacts if production is stopped for containment, revalidation, or corrective action.
- Products Liability – claims for injury or property damage arising from defective products (subject to policy terms).
- Product Recall / Withdrawal – optional cover for removing affected products from the supply chain (where available).
- Third-Party Financial Loss Claims – where included and insurable, relating to quality escape events (wording dependent).
- Defence Costs – legal defence and investigation support in the event of customer claims.
- Stock / WIP Protection – cover for damaged finished goods or WIP where an insured event applies (subject to wording).
- Business Interruption – loss of gross profit following insured events that halt production (trigger dependent).
- Specialist Quality / Rework Extensions – where available, support for rework and correction costs (insurer dependent).
- Goods in Transit – protection for shipments where handling/packaging contributes to damage risk.
Common ESD Loss Scenarios (How Claims Actually Happen)
Understanding how ESD losses present is essential when arranging insurance. Most businesses do not discover ESD damage at the moment it happens. It is more likely to be detected through test failures, customer returns, field failure analysis, or an unexpected spike in rejection rates. These scenarios can create messy disputes around responsibility, timing, and whether the loss is covered.
Below are typical ESD scenarios we see in semiconductor packaging/test and contract electronics manufacturing.
- Batch failure detected at final test following upstream handling changes or tool maintenance.
- Latent defect causing early-life field failures after shipment to an OEM or Tier 1 supplier.
- Customer claim following device failure in automotive or industrial control applications.
- ESD damage during kitting, picking, packing or repackaging for shipment.
- Handling damage during rework, inspection or microscope operations.
- Static discharge during conformal coating, curing, or post-process cleaning steps.
- Inadequate grounding at benches or poor wrist strap compliance during peak production.
- Packaging or transit issues (incorrect ESD bags, damaged shielding, missing labels).
- Humidity control failure increasing static risk during certain seasons or in dry process areas.
- ESD event linked to contractor work, site moves, or temporary workstations.
- Dispute over whether the damage occurred in manufacturing or at a customer site.
- Containment actions requiring shipment stop, quarantine, and extensive investigation.
How Underwriters Assess Your ESD Controls
For many insurers, ESD risk is a quality risk. That means they will focus on your prevention and detection controls, not just your building and machinery. If you can show structured ESD governance, documented compliance, and evidence of monitoring, you will generally find it easier to secure better terms.
Semiconductor and high-reliability electronics supply chains often require strong ESD programmes and audit trails. We help you present these controls clearly to insurers and align policy cover with your real exposures.
Typical ESD Control Questions
- Do you operate an ESD control programme and who is responsible?
- Wrist strap and footwear compliance monitoring and logging.
- ESD flooring, bench mats and grounding system testing frequency.
- Humidity control and monitoring in critical areas.
- Incoming inspection for ESD packaging and storage controls.
- Tooling and workstation design (grounding points, safe handling procedures).
- Training cadence and competency records for operators and contractors.
- ESD audits, corrective actions and trend reporting.
- Traceability and batch control to contain an issue quickly.
- Packaging standards: shielding bags, labels, reels, trays and transport methods.
Practical Steps to Reduce ESD Loss Frequency
- Automate compliance checks where possible (wrist strap testers, access controls).
- Increase audit frequency during peak volumes or seasonal low humidity periods.
- Improve packaging discipline and verification at dispatch.
- Use quarantine protocols and clear batch segregation processes.
- Maintain humidity control targets and alarm escalation procedures.
- Train contractors and temporary workers to the same ESD standard.
- Perform periodic field failure analysis and feed lessons into process controls.
- Document deviations and corrective actions clearly for claims-readiness.
ESD, Quality Escapes and Product Liability
ESD is often linked to “quality escape” events — defects that leave the factory and are discovered by customers or end users. These events can be costly even if no one is injured: investigation time, engineering resources, returns and replacements, expedited shipping, customer chargebacks, and potential loss of approved supplier status.
From an insurance perspective, the response depends on what the claim is about. Products liability is generally focused on third-party injury or property damage arising from defective products (subject to terms). Product recall/withdrawal cover, where available, can help with removing products from the market or supply chain. However, purely contractual liabilities and performance guarantees are often excluded or restricted.
The best approach is to align your contracts, QA processes and insurance wordings — and to ensure that your documentation supports your position if a dispute arises. We can help you structure cover that reflects how ESD risk manifests in your business.
Internal Costs
- Scrap and rework following detection of elevated failure rates
- Containment and quarantine labour, retesting and re-inspection
- Engineering investigation time and corrective actions
- Production stoppage and restart costs
External Costs
- Customer returns and replacement programmes
- Warranty discussions and dispute resolution
- Recall/withdrawal actions where required
- Legal defence and claims handling support
We had a spike in failures traced back to handling and packaging. Insure24 helped us present our controls to insurers and structure cover around the real-world risk.
Quality Manager, UK Electronics ManufacturerPROTECT YOUR OUTPUT
- Cover aligned to ESD-driven quality and liability exposures (subject to terms)
- Products liability and defence cost protection for third-party claims
- Optional recall/withdrawal support where available
- Help presenting ESD controls to secure better underwriting terms
- Insurance aligned to high-reliability supply chain requirements
Compliance & Regulations
ESD risk is often linked to quality standards and customer audit obligations. Our programmes can be structured to support common requirements such as:
- Customer ESD programmes and audit requirements
- Traceability, batch control and quality record retention
- Training and competency documentation for operators and contractors
- Storage and packaging standards for ESD-sensitive devices
- Incident management and corrective action processes
FREQUENTLY ASKED QUESTIONS
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What is ESD and why is it such a risk for chip and electronics manufacturers?
ESD (electrostatic discharge) is a sudden flow of electricity between objects with different electrical potentials. In semiconductor and electronics manufacturing, ESD can damage sensitive components or create latent defects that only appear after shipment. This can lead to scrap, rework, warranty returns, customer claims and (in severe cases) recall action.
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Does insurance cover internal scrap and rework caused by ESD?
Cover for internal scrap and rework depends on policy structure and insurer appetite. Many standard policies focus on physical damage and third-party liability, while scrap/rework can require specialist extensions or careful structuring. We help you map realistic scenarios and arrange cover that aligns with your exposure and controls.
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Is ESD damage covered under product liability insurance?
Products liability can respond to third-party claims for injury or property damage arising from defective products, subject to terms. If an ESD-related defect causes property damage or injury, product liability may be relevant. Pure performance or contractual claims may be excluded, so policy wording and contract terms matter.
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Can product recall insurance help with ESD-related quality escapes?
Potentially, yes. Where available, recall/withdrawal cover can help with costs to remove affected products from the supply chain, manage communications and coordinate containment. Availability depends on your products, markets, QA controls, traceability and claims history.
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What ESD controls do insurers expect?
Insurers commonly look for a documented ESD control programme, grounding and workstation testing, wrist strap/footwear compliance monitoring, humidity control where relevant, ESD-safe packaging and storage, training records, audit trails, and strong traceability/batch control to contain issues quickly.
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Does ESD risk affect insurance premiums?
Yes. Insurers assess the probability of quality escapes and the strength of your controls. A clear ESD programme, robust audit trails and strong traceability can improve underwriting confidence, which can help pricing and terms — especially for manufacturers supplying high-reliability markets.
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What information do you need to quote ESD-related cover?
We’ll usually ask about products and markets served, turnover, claims history, your ESD control programme, audit/testing frequency, packaging and storage procedures, traceability, customer contract requirements, and the types of losses you’re most concerned about (scrap/rework, customer claims, recall exposure, downtime).