Why Machinery Breakdown Insurance Matters

Modern Malaysian factories and industrial facilities rely heavily on continuous machinery uptime, whether it’s a single critical production line or an entire plant. A sudden mechanical or electrical breakdown can lead to:

• Costly repairs or replacement
• Production stoppages
• Contract penalties
• Material wastage
• Delayed delivery to customers

Fire / IAR policies do NOT cover internal machinery breakdown, but Machinery Breakdown (MB) insurance fills this gap.

Foundation works with industrial underwriters to provide MB and MLOP programmes for:

• Manufacturing plants
• Food & beverage facilities
• Packaging lines
• Chemical & process plants
• Logistics & cold-chain operations
• High-value mechanical equipment
• CNC, robotics and automation lines

What Machinery Breakdown (MB) Covers

Machinery Breakdown provides “accidental, sudden, and unforeseen” cover for mechanical and electrical equipment due to causes such as:

1. Mechanical Derangement

• Broken shafts
• Gear damage
• Bearing failures
• Lubrication failures

2. Electrical Causes

• Short circuits
• Power surges
• Motor burnout
• Insulation failure

3. Internal Failures

• Overheating
• Misalignment
• Centrifugal forces
• Abnormal vibration

4. Operator-Related Incidents (accidental)

• Improper handling
• Accidental operational errors

Covered Assets Often Include:

• Production lines
• Boilers & pressure vessels
• Compressors
• Cold room systems
• Generators
• Elevators & lifts
• CNC machines
• Robotics & automation systems
• Chillers, HVAC equipment
• Turbines & rotating machinery

MB covers repair or replacement cost, including dismantling, installation and freight where applicable.

What Is Machinery Loss of Profit (MLOP)?

Machinery Loss of Profit (also known as Machinery Breakdown Business Interruption or MBI) covers the financial impact of machinery breakdown.

If your machine suffers a breakdown covered under MB, MLOP compensates you for:

• Loss of gross profit
• Loss of revenue
• Increased cost of working
• Overtime, outsourcing, and sub-contracting
• Additional expenses needed to keep operations running

When is MLOP essential?

When any machine downtime can cause:

• Production backlog
• Contract penalties
• Loss of customers
• Disrupted cold chain
• Temporary closure of operations

For many Malaysian factories, MLOP is more critical than the machinery repair cost itself.

Who Needs MB & MLOP Insurance in Malaysia?

These covers are essential for:

• Medium to large manufacturing plants
• Industrial facilities with mechanical equipment
• Cold rooms and temperature-controlled operations
• Logistics hubs with automated systems
• Commercial buildings with centralised chillers
• Facilities with single-point-of-failure equipment

Your risk increases if you rely on:

• one key machine for production
• imported spare parts
• equipment with long lead times
• sensitive electronic systems
• high-throughput operations

Common MB & MLOP Claim Scenarios

Electrical Short Circuit in Production Line

A sudden power surge damaged the main motor and control panel.

MB: Covers motor & component replacement

MLOP: Covers production downtime + subcontracting costs

Cold Room Compressor Failure

A failed compressor caused temperature loss and spoilage of stored goods.

MB: Covers compressor repair

MLOP: Covers spoilage, revenue loss, overtime and expedited repairs

Bearing Failure in Rotary Equipment

Overheating caused bearing seizure, damaging shafts and housings.

MB: Covers mechanical damage

MLOP: Covers lost output during downtime

CNC Machine Breakdown

Tool alignment error caused internal damage requiring imported spare parts.

MB: Covers repair & freight

MLOP: Covers manufacturing delays and penalty costs

Chiller Breakdown in Commercial Building

Chiller compressor failure resulted in shutdown of HVAC for tenants.

MB: Covers repair

MLOP: Covers rental losses (if applicable)

How Foundation Supports Your MB / MLOP Programme

1. Technical Facility Review

We assess machinery type, condition, criticality, and operational dependencies to understand your exposure.

2. Underwriter Engagement

We prepare clear engineering submissions outlining machinery details, risk controls, and operational processes for accurate underwriting.

3. Structuring Sums Insured & BI Periods

We help determine realistic machinery values and BI indemnity periods based on production needs and downtime impact.

4. Documentation & Compliance

We align policy terms with your financier, lease, and operational requirements, ensuring smooth integration with your Fire/IAR programme.

5. Claims & Loss Adjuster Support

We coordinate with engineering loss adjusters, validate BI calculations, and support documentation to minimise operational downtime after a breakdown.