diff --git a/libs/entitlement/src/main/java/org/elasticsearch/entitlement/runtime/policy/PolicyUtils.java b/libs/entitlement/src/main/java/org/elasticsearch/entitlement/runtime/policy/PolicyUtils.java
index f7bcf63035bc8..df51d0f4049e6 100644
--- a/libs/entitlement/src/main/java/org/elasticsearch/entitlement/runtime/policy/PolicyUtils.java
+++ b/libs/entitlement/src/main/java/org/elasticsearch/entitlement/runtime/policy/PolicyUtils.java
@@ -81,6 +81,10 @@ public static Map<String, Policy> createPluginPolicies(
         return pluginPolicies;
     }
 
+    /**
+     * @throws PolicyParserException if the supplied policy is formatted incorrectly
+     * @throws IllegalStateException for any other error parsing the patch, such as nonexistent module names
+     */
     public static Policy parseEncodedPolicyIfExists(
         String encodedPolicy,
         String version,
@@ -106,11 +110,8 @@ public static Policy parseEncodedPolicyIfExists(
                         version
                     );
                 }
-            } catch (Exception ex) {
-                logger.warn(
-                    Strings.format("Found a policy patch with invalid content. The patch will not be applied. Layer [%s]", layerName),
-                    ex
-                );
+            } catch (Exception e) {
+                throw new IllegalStateException("Unable to parse policy patch for layer [" + layerName + "]", e);
             }
         }
         return null;
diff --git a/libs/entitlement/src/test/java/org/elasticsearch/entitlement/runtime/policy/PolicyUtilsTests.java b/libs/entitlement/src/test/java/org/elasticsearch/entitlement/runtime/policy/PolicyUtilsTests.java
index bb77f9c6a83ba..ed61087f7163c 100644
--- a/libs/entitlement/src/test/java/org/elasticsearch/entitlement/runtime/policy/PolicyUtilsTests.java
+++ b/libs/entitlement/src/test/java/org/elasticsearch/entitlement/runtime/policy/PolicyUtilsTests.java
@@ -134,6 +134,7 @@ public void testNoPatchWithVersionMismatch() {
 
     public void testNoPatchWithValidationError() {
 
+        // Nonexistent module names
         var policyPatch = """
             versions:
               - 9.0.0
@@ -149,13 +150,15 @@ public void testNoPatchWithValidationError() {
             StandardCharsets.UTF_8
         );
 
-        var policy = PolicyUtils.parseEncodedPolicyIfExists(base64EncodedPolicy, "9.0.0", true, "test-plugin", Set.of());
-
-        assertThat(policy, nullValue());
+        assertThrows(
+            IllegalStateException.class,
+            () -> PolicyUtils.parseEncodedPolicyIfExists(base64EncodedPolicy, "9.0.0", true, "test-plugin", Set.of())
+        );
     }
 
     public void testNoPatchWithParsingError() {
 
+        // no <version> or <policy> field
         var policyPatch = """
             entitlement-module-name:
               - load_native_libraries
@@ -167,9 +170,10 @@ public void testNoPatchWithParsingError() {
             StandardCharsets.UTF_8
         );
 
-        var policy = PolicyUtils.parseEncodedPolicyIfExists(base64EncodedPolicy, "9.0.0", true, "test-plugin", Set.of());
-
-        assertThat(policy, nullValue());
+        assertThrows(
+            IllegalStateException.class,
+            () -> PolicyUtils.parseEncodedPolicyIfExists(base64EncodedPolicy, "9.0.0", true, "test-plugin", Set.of())
+        );
     }
 
     public void testMergeScopes() {