In this work, an attempt has been made to understand the feasibility of using a ultrahigh frequency (UHF) technique for identification of any corona discharge/ arcing in insulating material due to water droplets. The sensors of broadband type are useful for the identification of such discharges. It is realized that corona discharges/arcing initiated by liquid droplet radiates UHF signals in the entire bandwidth up to 2 GHz. The frequency content of the UHF signal generated due to corona/arcing is not much varied in epoxy nanocomposites with different weight percentage of clay content. The exfoliated/intercalated properties were analysed through TEM studies. It is realized that corona initiated discharges are of intermittent process. It is observed that the permittivity and tan(δ) reduces with increase in percentage of clay in epoxy nanocomposite material up to 3 wt%. The hydrophobicity of the material is characterized through contact angle measurement. It is realized that low weight percentage of nanoclay content in epoxy resin reduces the surface carbonization due to arcing. © 2008 IOP Publishing Ltd.