The safety of electric vehicles (EVs) and their lithium-ion batteries has been prominent in the headlines in recent months.
Anecdotal evidence has created alarm about the risk of fire, fears which are understandably multiplied when the vehicles are transported by the hundreds at sea.
Airmic News attended the International Union of Marine Insurance (IUMI) 2023 conference, held in Edinburgh in September, where EV fires at sea were one focus on the industry body’s programme.
While the risk’s frequency is under scrutiny, the increasing size of car carriers and container ships means that any fires involving cargoes have represented a more severe accumulation risk for insurers.
“If we have 6,000 cars transported in a car carrier with an average value of €40,000, you have an exposure of around €250m. If you take a mega container ship, with 24,000, TEUs [i.e. boxes], the exposure is between €2-5bn,” said Pascal Dubois, chair of IUMI’s loss prevention committee, speaking to the press at the IUMI conference.
“I don't say the transport of EVs is not important. This is an issue, but maybe not the most important issue of the industry, without talking about accumulation exposure, which is really important for the industry,” said Dubois, who is also CEO of CESAM, a French industry group for marine and cargo insurance companies.
Fires can be catastrophic when they take hold aboard a merchant vessel. On 25 July, Fremantle Highway, a Panama-flagged car carrier was off the Netherlands coast, having travelled from Singapore, on its way to Bremerhaven in Germany, when it caught fire.
Initially, an employee of the ship’s Japanese owner speculated that one of the 498 EVs on board (out of 3,784 vehicles in total) might be to blame for the fire, which badly damaged the ship.
However, the fire was unlikely caused by an EV, according to the salvage company handling the wreck. The salvager revealed to Bloomberg that the EVs survived in a good condition, and the worst damage occurred to another part of the ship.
The media also has been quick to report on fire incidents for individual EVs, Dubois suggested, but that such anecdotal evidence of risk for a new technology was no substitute for sound analysis.
“We see many questions or statements in the press or even in the industry, saying EV fires are more frequent, they are more intense, they cannot be extinguished. Some people say EVs cannot be transported or they could not be insured,” he said.
He referred to a statistical presentation given by Jonna Hynynen, a research scientist at the RISE Research Institute of Sweden, into the numbers of EV fires per billion miles travelled.
“For internal combustion engine vehicles it’s 55, if you take EVs it’s five. The ratio is one tenth,” Dubois said.
“The question is more of detection and extinguishing capacity for fires, which is one of the most important issues for the industry, so that loss prevention is adapted to accompany new measures to be implemented for new risks,” he added.
The Lithium ion batteries that power EVs are at the centre of fire risk concerns.
Isabelle Therrien, chair of IUMI’s cargo committee, addressed the topic.
“The key for underwriters and for the industry is to understand that different modes of transportation have different procedures related to shipments of lithium ion batteries. And the key is also to understand the packaging of it and how it's being shipped,” she said.
Misdeclaration of cargo, particularly dangerous goods, has been a major focus topic for IUMI, she emphasised.
“Some of the different components involved in producing those batteries are less hazardous than others,” said Therrien, who is also executive vice president and head of cargo at Falvey Insurance Group, based in Toronto.
It was announced in September that Chubb will lead a lithium battery insurance consortium at Lloyd’s. The consortium will offer limits up to $50m for risk types associated with lithium batteries including transit, stock throughput, standalone stock and warehouse legal liability, and will include excess stock and part orders.
The consortium was created to address a lack of capacity in the marine cargo market for providing lithium battery transit and stock insurance, the US insurer said. It will be led by Chubb Global Markets (CGM), the company’s London market wholesale and specialty business including its Lloyd’s platform, and supported by 11 other Lloyd’s syndicates.
Rob Wilson, chief underwriting officer for Chubb Global Markets, said: “We’re delighted to lead the creation of this battery consortium with the support of the Lloyd’s market, utilising our in-house risk management capabilities to ensure its viability.
“The work involved in managing lithium battery risks is extensive and brokers can now use this facility to gain access to capacity in this new risk area. The consortium provides brokers and insureds with a single port of call to bind these risks, helping to shore up the lithium battery supply chain as demand continues to grow,” said Wilson.
Demand for EV data and subject matter expertise has grown fast, as the technology’s implementation has occurred faster than the rate at which risk and insurance professionals have grown comfortable with the emerging risks involved.
“It’s about making sure that we as an underwriting community understand how it’s shipped, what level of charge it is, and about the components of batteries,” IUMI’s Therrien added.