The insulation-resistance test is used as a non-destructive method of detecting the presence of water in insulating components in service. Water penetrates only the outer layers of oil-immersed Bakelized paper leading to the formation of a low-resistance surface skin. It is shown that, by taking account of the operating conditions, a critical surface conductivity can be estimated above which the insulation will fail in service.The correlation between conductivity under working conditions and insulation resistance is described. A method of estimating a rejection limit of insulation resistance for a component in service is suggested. The measurements needed are stated.