Amidst the rapid downstreaming of industry and mining in Indonesia, including factory and smelter projects built or managed by Chinese companies, operational and financial risks continue to increase. To ensure the security of your investment, the program factory and smelter insurance become a very basic need.
However, what is much more important is choosing the right partner, namely an insurance broker for Chinese companies such as L&G Insurance Broker, not an agent or buying directly from an insurance company. Because brokers are committed to assisting you from the planning stage to the moment a claim arises, ensuring that your insurance program truly covers all risks and that claims are settled and paid out.
If you are a Chinese company that owns or will operate a factory or smelter in Indonesia, we invite you to a FREE consultation with L&G.
Contact WhatsApp 0811-8507-773 or email halo@lngrisk.co.id to discuss the best factory and smelter insurance program for your business.
Why Is Factory and Smelter Insurance Mandatory for Chinese Companies?
Factory and smelter projects by Chinese companies in Indonesia have unique characteristics: large investments, high-tech technology, imported components and machinery from China, locations that are sometimes remote or near sensitive environments, demanding local regulations, and the potential for significant environmental and security disruptions. In this context, protection through factory and smelter insurance should not be considered merely an optional option but rather an integral part of a core business strategy.
Some points that emphasize this need:
- The investment value of a factory/smelter can be very large
Damage to a single unit or operational disruption can result in losses of hundreds of millions of dollars or even trillions of rupiah. For example, PT Freeport Indonesia experienced damage to its smelter estimated at US$100 million due to a fire. CAN+1 - An operational incident occurred in the smelter area
For example, the explosion at PT Indonesia Tsingshan Stainless Steel (ITSS) in the Morowali Industrial Estate shows that smelter projects involve significant risks, this incident reminds us of the importance of comprehensive protection. Liga Asuransi - Indonesian regulations are becoming stricter regarding safety, the environment and legal liability.
Having a proper factory and smelter insurance program is also part of complying with government requirements. - Operational complexity
Imported machinery, smelting processes, the use of hazardous chemicals, and product distribution all pose the potential for physical damage, environmental pollution, workplace accidents, and even production delays. Therefore, factory and smelter insurance programs must be designed to address these risks.
Thus, as a Chinese company that already has or will operate a factory or smelter in Indonesia, taking proactive steps to build protection through factory and smelter insurance is a smart business decision.
Definition of Factory and Smelter Insurance and its Coverage
To understand how the protection program works, let’s explain the general scope and coverage of factory and smelter insurance.
Definition
Factory and smelter insurance is a policy or series of policies designed to protect factory facilities (including production processes, machinery, heavy equipment, buildings, tanks, and supporting infrastructure) and smelter facilities (including furnaces, smelting installations, refining facilities, chemicals, and internal logistics) from physical damage, loss, operational disruption, and third-party legal liability.
General Coverage
Some elements that are generally covered in factory and smelter insurance programs include:
- Physical damage or loss of factory/smelter assets due to fire, explosion, earthquake, flood, landslide, strong winds, and other technical disturbances.
- Damage to machinery, heavy equipment, installations, including critical imported components.
- Operational disruptions such as production delays due to major damage (Delay in Start Up / DSU) or Advanced Loss of Profit (ALOP).
- Third-party liability due to accidents on site, environmental pollution, or damage to another party’s property.
- Import or transportation risks from China to the factory/smelter location, including delivery of raw materials or machinery (which can be combined with shipping insurance).
- Smelter-specific environmental risks, such as pollution, waste management, and related liabilities, exist. For example, the ITSS smelter explosion in Morowali triggered increased regulatory oversight. Liga Asuransi
Why Is This Coverage Important for Chinese Companies?
Because Chinese companies often import technology, machinery, and components, they face specific risks: breakdowns during commissioning, local technology adaptation, logistical challenges, interactions with local subcontractors, and Indonesian regulations applicable to factories/smelters. Factory and smelter insurance programs must be designed to cover all of these. Otherwise, you could be left behind when disaster strikes.
Types of Insurance Needed for Factories and Smelters
To ensure comprehensive protection, here are the types of factory and smelter insurance that Chinese companies in Indonesia should have:
- Property All Risks (PAR) Insurance
Protects factory buildings, warehouses, machinery, and production facilities from the risks of fire, explosion, lightning, flooding, and accidental damage. This is mandatory basic insurance for all factories and smelters.
- Machinery Breakdown Insurance
Covers the cost of repairing or replacing machinery due to sudden breakdowns (not due to normal wear and tear). This is crucial for factories and smelters with high-tech machinery.
- Business Interruption (Loss of Profit) Insurance
If a factory shuts down due to fire or major damage, this insurance covers lost revenue and fixed costs such as employee salaries, installments, and production contracts. Without it, a company’s cash flow could be completely disrupted.
- Contractor’s Plant and Machinery (CPM) Insurance
To protect heavy equipment used in smelter or factory construction areas, such as excavators, cranes, or bulldozers, from the risk of damage, accidents, or theft.
- Public Liability Insurance
Protects against third party claims, for example in the event of a work accident involving the local community or damage to property outside the factory area.
- Employer’s Liability / Workmen’s Compensation
Providing protection for workers from workplace accidents is essential to comply with Indonesian regulations and maintain healthy industrial relations.
- Marine Cargo / Inland Transit Insurance
For smelters that import raw materials or ship production results, logistics shipping insurance is still required to ensure safety during sea and land transportation.
Why Are Insurance Brokers More Important Than Agents for Chinese Companies?
In this section, we explore why choosing an insurance broker for a Chinese company like L&G is far superior to simply purchasing through an agent or directly from an insurance company, especially for factory and smelter insurance programs.
- Brokers understand your specific needs
Insurance brokers for Chinese companies understand that you’re making a significant investment in Indonesia, involving imported machinery, foreign technology, local contractors, and unique local risks. They have experience handling large factory/smelter projects, including engineering, logistics, regulatory requirements, and significant claims. In contrast, agents may only offer standard products and lack an understanding of the complexities of your project.
Nickel smelter projects now face complex construction risks, professional brokers are needed to design appropriate safeguards.
- Brokers represent your interests, not the insurance company.
When you buy through an agent or directly from an insurer, the primary focus is sometimes on issuing the policy. However, when a risk arises, you could be faced with surveyors, adjusters, and complex negotiations.
Brokers like L&G act as your partners, helping you choose the best program, negotiate terms, and follow up with your claim through to disbursement. This is crucial when you have a significant investment in a factory or smelter.
- Brokers accompany claims until they are disbursed
Factory and smelter insurance programs often involve complex claims: major damage, operational disruption, and third-party liability. A broker will assist with documentation, negotiate with adjusters, and expedite the claims process. Agents or direct purchasers may terminate the policy once it’s issued, leaving you on your own when the risk arises.
- Brokers provide customized solutions and market access
Brokers have access to a variety of local and international insurance companies. They can tailor your factory and smelter insurance program to your needs, including machinery imports, operating risks, environmental liability, and international contracting (EPC). Agents have limited coverage, and product choices may be more limited. With a broker, you can find the best options and optimal terms.
- Long-term risk management and regular reviews
Factories or smelters are long-term operations. If there are changes in risk, new technology, environmental regulations, changes in asset value, or changes in contractors, brokers regularly review and adjust your program to stay relevant. Agents or direct purchases from insurance companies often don’t offer this service.
Overall, if you are a Chinese company operating in the factory or smelter industry in Indonesia, then only with an insurance broker will you get truly effective protection.
Case Study Example: An Incident That Highlights the Need for Factory and Smelter Insurance
To make the explanation more concrete, here are some examples relevant to factory and smelter insurance programs.
Case A: Freeport Smelter Fire
Freeport Indonesia’s smelter in Gresik experienced a fire that is estimated to have caused losses of US$100 million. OH
These losses were covered by insurance, but only because of the proper program and early protective measures in place. For Chinese companies operating smelters, this serves as a reminder that significant risks are real and that protection through factory and smelter insurance is essential.
Case B: ITSS Smelter Explosion in Morowali
The ITSS smelter furnace explosion incident in Morowali on December 24, 2023 killed dozens of workers and halted smelter operations.Liga Asuransi
This incident shows that even in large-scale and modern projects, operational and safety risks remain high, meaning the need for protection for investors (including Chinese companies) is crucial.
Lessons from the Case Above
- The losses can be substantial and have both financial and reputational impacts.
- Protection through appropriate factory and smelter insurance is a pillar of sustainable operations.
- Large claims require expert assistance (brokers) to be resolved quickly and effectively.
- Companies that ignore this could face double risks: loss of assets and loss of partner trust.
Key Components of a Factory and Smelter Insurance Program That You Must Ensure
To ensure that your factory and smelter insurance program truly protects you, here are some key components to consider:
- Physical coverage (all risks) for buildings, machines, installations, furnaces, heavy equipment.
- Import and distribution components from China — if you import machinery or raw materials from China, make sure the risks are accommodated.
- Operational disruption (DSU / Delay in Start Up) — if operations are delayed due to major damage, loss of revenue is insured.
- Third party liability — important in smelter projects near sensitive communities or environments.
- Environmental and pollution risks — smelters have a high potential for pollution; Indonesian regulations tighten these obligations.
- Clear claims procedures and broker assistance — documentation, damage evaluation, claims flow.
- Review and update asset values — ensure coverage values reflect the realities of your investments and changes in technology.
- Program preparation by a broker who understands the EPC contract, regulations and characteristics of your assets.
By ensuring these components are met, you as a Chinese company can run your factory or smelter project more safely.
Practical Steps to Starting a Factory and Smelter Insurance Program for Chinese Companies
If you’re ready to take action, here’s a practical guide to getting started with a plant and smelter insurance program:
- Conduct an internal audit of your project, such as investment value, machinery used, imports from China, location, production conditions, local regulations.
- Contact an insurance broker for Chinese companies like L&G and have an initial discussion about the risks and protection programs needed.
- Brokers help prepare risk analyses, present policy options, and negotiate the most optimal conditions.
- Implement the policy and ensure complete documentation including coverage amount, claim terms, incident response.
- Establish internal mitigation procedures, such as routine maintenance, safety systems, and regulatory audits. Your factory and smelter insurance program will be stronger if internal mitigation is also in place.
- Regularly review with your broker, such as changing asset values, evolving technology, changing regulations, and ensure your program remains relevant.
This way, you not only have a policy but also strategic protection that is ready to operate when risks arise.
Cover
The factory and smelter projects undertaken by Chinese companies in Indonesia bring great opportunities, but also significant risks. Having a program factory and smelter insurance The right insurance through an insurance broker for Chinese companies such as L&G Insurance Broker is a vital step to safeguard your investment, reputation and business continuity.
Insurance brokers are here to be your partners. They analyze risks, design the best programs, and accompany claims until they are paid out, not just sell policies.
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DON’T WASTE YOUR TIME AND SECURE YOUR FINANCIAL AND BUSINESS WITH THE RIGHT INSURANCE.
HOTLINE L&G 24 JAM: 0811-8507-773 (CALL – WHATSAPP – SMS)
Website: lngrisk.co.id
Email: halo@lngrisk.co.id
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