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WHERE SEMICONDUCTOR INSURANCE PROGRAMMES OFTEN FALL SHORT
Semiconductor manufacturing insurance programmes are complex. While policies may appear comprehensive, exclusions and structural gaps can significantly limit recovery following a major incident.
This guide explains the most common exclusions affecting wafer fabs, cleanroom facilities and chip manufacturers — and how to structure your programme to reduce the risk of uninsured loss.
1. Contamination Without Physical Damage
One of the most common gaps in semiconductor insurance relates to contamination events. Many standard property policies require “physical damage” to trigger a claim.
- Particle excursions affecting yield
- Airborne contamination events
- Process residue affecting wafer batches
- Humidity or environmental control deviation
Without a specialist contamination extension, these losses may not be covered.
2. Gradual Pollution Exclusions
Public liability policies commonly exclude gradual pollution. Semiconductor facilities handling chemicals and wastewater may face environmental exposure.
- Slow leaks from storage tanks
- Wastewater discharge issues
- Soil or groundwater contamination
- Regulatory remediation orders
A dedicated environmental liability policy is often required to close this gap.
3. Supply Chain Without Insured Trigger
Contingent business interruption (CBI) requires an insured event at a supplier’s premises. General market shortages or commercial allocation decisions are typically excluded.
- Global semiconductor scarcity
- Supplier prioritising other customers
- Price escalation
- Shipping delays without physical damage
Understanding policy triggers is essential to avoid false assumptions about cover.
4. Wear & Tear and Gradual Deterioration
Engineering policies generally exclude wear and tear. Only sudden and unforeseen breakdown events are typically covered.
- Component fatigue
- Progressive electrical degradation
- Maintenance-related failures
Strong maintenance documentation is critical for claims defensibility.
5. Cyber Exclusions in Property Policies
Many property and engineering policies now contain cyber exclusions. If an operational technology (OT) failure is caused by cyber attack, coverage may require a standalone cyber policy.
- Ransomware affecting fab control systems
- Malicious interference with environmental controls
- Data corruption affecting process control
6. Underinsurance & Indemnity Period Gaps
Even where cover exists, underinsurance can reduce recovery.
- Incorrect building reinstatement values
- Tool values not updated after capital investment
- Indemnity period shorter than realistic recovery
- Sub-limits applied to key extensions
Regular valuation reviews are essential in high-growth semiconductor facilities.
Reduce the Risk of Policy Gaps
Insurance programmes should be reviewed annually against operational changes. Insure24 can provide a structured semiconductor insurance gap analysis.
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FREQUENTLY ASKED QUESTIONS
Why are contamination losses sometimes excluded?
Many property policies require physical damage to trigger a claim. Pure contamination without physical alteration may require specialist extensions.
Does insurance cover global semiconductor shortages?
Typically not. Policies usually require a defined insured event rather than general market conditions.
Are cyber events covered under property insurance?
Many policies contain cyber exclusions. A dedicated cyber policy may be required.
What is underinsurance?
Underinsurance occurs when sums insured are lower than actual reinstatement or exposure values, potentially reducing claims settlement.
Can Insure24 review our exclusions?
Yes. We can analyse your policies and identify structural gaps or exclusion risks.