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SUPPLY-CHAIN INSURANCE FOR SEMICONDUCTOR MANUFACTURING DEPENDENCIES
Why Supply-Chain Risk Is a Major Exposure in Semiconductor Manufacturing
Semiconductor manufacturing operates within one of the most complex and globally interdependent supply chains on the planet. A UK semiconductor business may rely on speciality gases, ultra-pure chemicals, silicon wafers, substrates, photomasks, spare parts, test sockets, OEM field engineers, and overseas packaging partners — often with limited alternatives and long lead times.
When a key supplier or service provider suffers a loss event, the result can be immediate: production stoppage, missed delivery milestones, penalty clauses, loss of customer confidence, and expensive mitigation actions. Standard business interruption (BI) typically focuses on damage at your own premises. Supply-chain and contingent business interruption (CBI) extends your protection beyond your site, to certain disruptions affecting named suppliers, customers, and critical third parties — subject to policy triggers, underwriting and wording.
Insure24 arranges supply-chain and contingent BI insurance designed for semiconductor manufacturers, foundries, packaging and test facilities, and advanced electronics producers, with policy structures aligned to your real dependencies.
PROTECT TURNOVER WHEN KEY SUPPLIERS OR CUSTOMERS ARE HIT
Designed for Single-Source Inputs, Long Lead Times & Global Partners
Many semiconductor businesses have unavoidable concentration risk: one photomask supplier, one substrate provider, one packaging partner, one OEM service provider. Supply-chain insurance helps manage the financial impact when a disruption occurs — and can support mitigation costs to protect customer delivery.
What Is Contingent Business Interruption (CBI)?
Contingent BI is a business interruption extension that can provide cover when an insured event impacts a third party you depend on — such as a key supplier, customer, contract manufacturer, logistics hub, or service provider. Instead of the trigger being damage at your own premises, the trigger is damage at the dependent location (subject to policy wording and insured perils).
Semiconductor supply-chain programmes are often bespoke: insurers will want to understand the nature of dependencies, the locations involved, the concentration by revenue/volume, and how quickly alternatives can be activated. Insure24 helps you present this clearly so underwriters can offer the strongest available terms.
What Supply-Chain / CBI Cover Can Include
- Loss of gross profit / revenue due to supplier disruption
- Loss from customer site disruption causing order cancellations or delays
- Named supplier and/or unnamed supplier options (where available)
- Named customer / dependent customer options
- Service provider interruption (e.g., critical outsourced steps)
- Extra expense to source alternatives and mitigate loss (subject to wording)
- Denial of access / loss of attraction extensions (where relevant)
Typical Policy Conditions to Expect
- Specified insured perils (often similar to property perils)
- Sub-limits and/or separate sums insured for CBI
- Waiting periods or time deductibles for certain triggers
- Requirement to disclose top dependencies and concentrations
- Territory definitions and catastrophe accumulation considerations
- Evidence of dependency and loss calculation methodology
- Material change obligations (e.g., new key supplier added)
Common Semiconductor Supply-Chain Dependencies
Underwriters need to understand where your operational “single points of failure” sit. These are typical dependency categories that can be insured through CBI structures, subject to underwriting appetite and policy wording.
Upstream (Inputs & Services)
- Silicon wafers, substrates, leadframes, interposers
- Photomasks / reticles and mask writing services
- Speciality gases (e.g., nitrogen, argon, process gases) and gas suppliers
- Ultra-pure chemicals, acids, solvents and photoresists
- Spare parts supply for critical tools (OEM single-source components)
- OEM service engineers and maintenance partners
- Cleanroom consumables and filtration components
Downstream (Partners & Customers)
- OSAT packaging and test partners
- Contract manufacturers for module assembly
- Key distributors and fulfilment partners
- Automotive tier suppliers and major OEM customers
- Industrial/medical device customers with strict delivery milestones
- Regional logistics hubs and freight forwarders
- Data exchange partners / EDI dependencies for release & scheduling
What Supply-Chain Losses Look Like in Practice
Supply-chain disruption usually creates two types of cost: lost margin from missed sales and increased costs to keep supplying. Semiconductor businesses often experience “knock-on” impacts such as requalification costs, expedited logistics, and contractual penalties when delays occur.
Typical Financial Impacts
- Lost gross profit due to halted production or missed shipments
- Rush procurement of alternative inputs at higher cost
- Premium freight and expedited customs clearance
- Overtime shifts and additional staffing to catch up
- Requalification and validation time to onboard a new supplier
- Chargebacks and penalties under supply agreements (where insurable/covered)
- Loss of customer confidence and long-term contract impact
Typical Mitigation Actions
- Dual-sourcing or secondary qualification programmes
- Building safety stock for critical materials
- Pre-approved alternative logistics routes
- Temporary outsourcing of packaging/test steps
- Prioritised customer allocation planning
- Contract review and renegotiation support
- Business continuity and crisis response planning
Designing a Contingent BI Programme That Actually Works
CBI is powerful, but it must be designed carefully: which parties are named, what perils trigger cover, what sub-limits apply, and how the loss will be calculated. Insure24 helps you avoid common pitfalls and structure cover that fits your risk profile.
Common CBI Pitfalls
- Not naming the true “single points of failure”
- Sub-limits too low for realistic loss scenarios
- Indemnity periods not aligned to long lead-time alternatives
- Triggers limited to perils that don’t match your risk (e.g., excluding breakdown)
- Geography not aligned to global dependency footprint
- No plan for proving dependency and measuring the loss
- Failure to update when suppliers/customers change
What Underwriters Want to See
- Top 10 suppliers/customers with % of revenue/volume
- Locations of dependent parties and any catastrophe exposure
- Alternative supplier availability and qualification timelines
- Inventory strategy and safety stock policy
- Contracts: delivery milestones, penalties, force majeure provisions
- Business continuity plans and crisis response capability
- Evidence of resilience investments (dual sourcing, supplier audits)
Supply-Chain & CBI Loss Scenarios (Semiconductor Examples)
Case Study: Mask Supplier Loss Event
Situation: A photomask supplier suffered a loss event that delayed critical mask delivery.
Impact: Production scheduling disruption, missed delivery milestones and increased cost to source alternatives.
How CBI Helps: Where a qualifying insured peril triggers cover at the supplier location, CBI can protect gross profit and certain increased costs of working, subject to limits and wording.
Case Study: Overseas Packaging Partner Shutdown
Situation: An OSAT partner experienced an incident and could not process shipments for a period.
Impact: Backlog, delayed deliveries and risk of chargebacks from customers.
How CBI Helps: A tailored programme can extend protection to dependent third-party sites, helping fund mitigation and protect income during disruption.
Case Study: Critical Gas Supplier Disruption
Situation: A disruption impacted deliveries of a critical speciality gas used in production.
Impact: Immediate process interruption and expensive mitigation actions to maintain production.
How CBI Helps: If the disruption is caused by an insured event at the supplier, CBI can support the resulting loss of gross profit and certain increased costs, subject to policy terms.
Case Study: Major Customer Site Loss
Situation: A key customer suffered a loss event, halting production and delaying purchase orders.
Impact: Reduced shipments and revenue impact over the recovery period.
How CBI Helps: Dependent customer extensions can respond to certain losses when a named customer is impacted by an insured peril, subject to underwriting and wording.
Supply-Chain & Contingent BI Coverage Levels
Options to suit early-stage manufacturers through to global supply networks — structured around dependency severity and recovery time.
Starter CBI
Ideal for: low concentration risk, multiple alternative suppliers
- Core dependent supplier extension
- Shorter indemnity period selection
- Simpler sub-limits
Standard CBI
Ideal for: identified key suppliers/customers and supply constraints
- Named suppliers and/or named customers
- Higher sub-limits and improved extra expense options
- Better alignment to delivery commitments
Premium CBI
Ideal for: single-source inputs, long qualification timelines
- Higher limits aligned to worst-case scenarios
- Longer indemnity periods where justified
- Broader extension set subject to underwriting
Enterprise / Multi-Dependency
Ideal for: complex global dependency footprints
- Programme approach across multiple suppliers/customers
- Catastrophe accumulation and territory structuring
- Advanced claims support and loss modelling
Insure24 helped us map our true dependency risks and structure contingent BI cover around our key suppliers and packaging partners. That gave us confidence in our resilience plan.
COO, Semiconductor Supply Chain BusinessWhy Choose Insure24 for Supply-Chain & CBI Insurance
- We understand semiconductor dependency and concentration risk
- Support to map suppliers/customers and present risk clearly to underwriters
- CBI structured around realistic lead times and qualification timelines
- Integration with BI, property and engineering covers
- Fast quotation process with specialist guidance
How to Get Supply-Chain & Contingent BI Insurance
- 1. List your key suppliers, customers and critical third parties
- 2. Provide locations and concentration (% of turnover/volume)
- 3. Explain lead times and supplier qualification timelines
- 4. Share contracts, penalties and resilience measures
- 5. Receive tailored quotations and select limits that match realistic scenarios
FREQUENTLY ASKED QUESTIONS
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What is contingent business interruption (CBI) insurance?
CBI is a business interruption extension that can cover loss of gross profit or revenue when a key supplier, customer, or dependent third party suffers a qualifying insured event that disrupts your ability to trade. Cover is subject to policy wording, triggers, limits and underwriting.
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Does supply-chain insurance cover delays from shipping or logistics?
Sometimes, depending on the cover selected. Many CBI policies focus on insured perils (such as fire) at dependent locations, rather than general transport delay. However, supply-chain programmes can be structured with relevant extensions where available and appropriate for your risk profile.
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Do I need to name my suppliers and customers?
Often yes. Many CBI policies are written on a named supplier/customer basis, especially where there is significant concentration risk. Some insurers may offer limited unnamed supplier options, but terms depend on your sector, geography and loss modelling.
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How do insurers assess supply-chain risk for semiconductors?
Insurers typically review dependency concentration, locations, alternative suppliers, lead times, qualification timelines, inventory strategy, contractual obligations and catastrophe exposures. Providing clear supplier/customer data improves the quality of terms available.
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Can CBI cover include extra expense to mitigate losses?
Often yes, subject to wording. Increased cost of working / extra expense provisions can support measures that reduce the overall loss, such as alternative sourcing, expedited freight, temporary outsourcing, and overtime shifts, provided the costs are reasonable and within policy limits.
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How quickly can Insure24 arrange supply-chain and CBI cover?
We can often provide an initial indication quickly, with tailored terms arranged once we’ve reviewed your dependency list, locations, concentrations, lead times and desired limits/indemnity periods.