Insurance Risks Every Plastics Manufacturer Should Review // PlastikCity Insurance Blog

Plastics manufacturers face a combination of risks that can be difficult to address through a standard business insurance package. Specialist machinery, combustible materials, customer-owned mould tools, production dependencies and strict supply-chain requirements can all affect the type and level of cover a business needs.

A fire, machinery breakdown, cyber incident or damaged mould tool could interrupt production for weeks or even months. The financial impact may extend beyond the immediate damage, particularly where specialist machinery has a long replacement lead time, customer property is involved or uninterrupted supply is essential.

Insurance arrangements should therefore be reviewed regularly, particularly after machinery investments, changes in production, new customer contracts or significant increases in stock and turnover.

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The insurance risks plastics manufacturers should review

Machinery and equipment

Injection moulding machines, extrusion lines, robots, automation and ancillary equipment can represent a significant proportion of a manufacturer’s assets.

When reviewing machinery values, it is important to consider the complete cost of replacement, rather than relying only on the original purchase price. This may include:

• Freight and delivery
• Lifting and positioning
• Electrical or infrastructure work
• Installation
• Commissioning
• Validation
• Professional fees

Replacement costs and lead times can also change considerably over the life of a machine. Recently purchased machinery, robots and ancillary equipment should be added to the insurance arrangements promptly, rather than waiting until the next renewal.

Manufacturers should also check how their policy responds to accidental damage, machinery breakdown and damage caused by fire, flood or another insured event. These are not necessarily addressed in the same way.

Fire and property damage

Fire remains an important risk for plastics processing businesses because of the combination of machinery, electrical systems, heating equipment, polymers, packaging and finished stock found on many sites.

A fire can affect far more than the immediate production area. Damage may also extend to:

• Electrical infrastructure
• Material handling equipment
• Mould tools
• Raw materials
• Finished products
• Offices and production records
• Neighbouring units or property

Insurance values should reflect the cost of rebuilding and replacing the affected assets. It is also important to review any requirements relating to fire detection, maintenance, storage, housekeeping and risk-management procedures.

Changes to the building, production layout or electrical supply should be considered as part of the insurance review.

Stock and raw materials

Polymer, additives, colourants, packaging, work in progress and finished products can create substantial stock values.

These values may fluctuate because of:

• Seasonal demand
• Bulk purchasing
• Raw material shortages
• Imported material lead times
• Customer stockholding agreements
• Changes in production volumes

A declared value based on the average amount held may not be sufficient if stock rises significantly at certain points in the year.

Manufacturers should consider the maximum value that could reasonably be held at one time, including customer-supplied materials and finished goods awaiting delivery.

The storage arrangements may also be relevant. Stock held in external warehouses, temporary buildings or another company’s premises may need to be considered separately.

Production downtime

Damage to machinery or premises can interrupt production long after the immediate incident has been dealt with.

A specialist plastics machine may take months to source, deliver, install and commission. The recovery period could also include:

• Repairs to buildings and utilities
• Replacement of damaged mould tools
• Electrical and infrastructure work
• Trial production
• Product validation
• Customer approval
• Recruitment or retraining
• Rebuilding stock
• Restoring production systems

Business interruption cover should be based on how long the company could realistically take to return to its previous level of operation.

A manufacturer that relies on one site, a small number of key machines or a specialist supplier may face a particularly significant exposure.

Businesses should also consider what would happen if disruption occurred at a critical supplier, subcontractor or customer, rather than at their own premises.

Customer-owned tools and property

Many plastic moulders hold valuable property belonging to their customers. This may include:

• Mould tools and inserts
• Raw materials
• Packaging
• Components
• Work in progress
• Finished goods

Responsibility for this property may depend on the customer contract and the insurance arrangements maintained by both parties.

Manufacturers should establish whether customer-owned property is covered while it is:

• On their premises
• Stored away from the main site
• Being repaired or modified
• In transit
• Held by a toolmaker or subcontractor

The declared values should also be reviewed regularly. A mould tool may cost considerably more to replace than its original value, particularly when design work, specialist materials, validation and production delays are taken into account.

Damage to a customer-owned tool could also cause a wider production loss, even where the physical damage itself is relatively limited.

Product liability

A low-value plastic component may form part of a much larger product or assembly.

If that component fails, the consequences could extend beyond replacing the individual part. There may be damage to other components, disruption to a customer’s production, product withdrawal or claims involving the finished product.

Product liability is particularly relevant for manufacturers supplying:

• Automotive components
• Medical products
• Food and beverage packaging
• Electrical and electronic products
• Construction products
• Aerospace components
• Safety-critical applications

Manufacturers should provide accurate information about the products they make, their end uses, the countries supplied and the industries they serve.

Changes in products or customers should be reported, particularly where the business moves into a more technically demanding or safety-critical market.

Contracts should also be reviewed carefully, as customers may attempt to transfer additional responsibilities or liabilities to the supplier.

Cyber and connected production

Cyber risk is not limited to the loss of personal data.

Modern plastics manufacturers often rely on connected systems, through MES, MRP and ERP software, to manage:

• Production scheduling
• Machinery settings
• Quality records
• Stock control
• Customer orders
• Supplier payments
• Remote technical support
• Production and validation data

A ransomware attack or systems failure could prevent machines from running, delay deliveries or remove access to essential records.

Remote access to machinery can also create exposure where suppliers, engineers or equipment manufacturers connect to production systems from outside the business.

Manufacturers should consider both the insurance response and the practical steps required to restore production following an incident. This may include investigation, system recovery, specialist support, communication with customers and additional operating costs.

Environmental liability

Plastics processing, recycling and material handling can create environmental exposures that may not be fully addressed by standard public liability cover.

Potential incidents include:

• Oil, fuel or polymer spills
• Chemical and additive leaks
• Firewater runoff
• Waste storage incidents
• Pollution affecting neighbouring sites
• Contaminated land
• Clean-up and remediation work

Recyclers, compounders and businesses handling larger volumes of waste or chemicals may face additional risks.

An environmental incident can lead to investigation costs, clean-up work, regulatory involvement and claims from neighbouring businesses or property owners.

Manufacturers should review their activities, storage arrangements and site history when considering whether specialist environmental cover may be appropriate.

When should your insurance be reviewed?

A full review should not be limited to the renewal date.

Your arrangements may need to be reconsidered after:

• Buying or replacing machinery
• Installing robots or automation
• Moving premises
• Increasing stock levels
• Starting a new product range
• Winning a major customer
• Entering a new market
• Changing production volumes
• Taking responsibility for additional customer property
• Introducing new software or remote machinery access

Keeping the information supplied to insurers accurate can help reduce the risk of gaps, unsuitable limits or unexpected issues if a claim occurs.

Get a free quote

PlastikCity Insurance Services specialises in business insurance for the UK plastics industry.

Getting started is quick. Send us a few basic details and we will contact you within 24 hours to explain what is needed next.

Get a free quote >>

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