Taiwan's semiconductor and TFT-LCD makers may see their coverage for disaster-related damage reduced as international re-insurance companies have announced stricter terms in the wake of an increase in incidents involving natural disaster, reported the local Economic Daily yesterday.

The report said 300-millimeter wafer plants and 6G TFT-LCD plants, which on average cost US$2.5 billion to build, may receive just US$1 billion in coverage for damage caused by natural disaster. The report appeared barely three months before Taiwan's premier semiconductor and TFT-LCD firms, such as Taiwan Semiconductor Manufacturing Co. and AU Optronics, are set to negotiate new policies in April.

Lowering maximum coverage is not good news for Taiwan as some of the island's largest IC and flat-panel firms are in the process of expanding their capacities by building more advanced 300-mm or 6G or 7G plants and need to take better risk management measures.

In the past, a full-scale 200-mm wafer fab, which takes US$1 billion to build, would receive US$750 million to US$1 billion in coverage for damage caused by fire, earthquake or other natural disaster. The same amount of coverage for a 300-mm fab, which takes US$$2.5 to US$3 billion to build, might put operators in a difficult situation, the paper said.

Terms offered by insurers have also become stricter. For example, a company may now claim damage when operations are suspended for 14 days due to natural disaster -- a higher threshold for 7 days in the past, the paper said.

Manufacturers will communicate with insurance companies to get the best deal out of the new policies, the paper said.