The Big Question: Can insures solve lithium risks to keep sustainability intact?

renewable power sources with Lithium-Ion batteries currently the subject of intense debate.

European Risk Management Association FERMA has published a new white paper, “Insuring the Transition – The Issues Confronting Risk Managers”, which urges insurers to do more to support the transition to net zero.

It warned European companies are increasingly under pressure to transition towards net-zero but are being hampered by a lack of adequate and accessible insurance that creates uncertainty and financial barriers that could delay or derail investments in climate technologies and sustainable business models.

The report identified a range of causative factors, including underwriting activities guided by pressure from regulations and/or civil society rather than clients’ needs, and a lack of capacity for specific “new” technologies, material or methods. These include (offshore) solar panels and wind farms, lithium batteries, and hydrogen fuels.

The threat from the transportation of electric vehicles and the lithium-Ion batteries which power them and many other pieces of equipment vital to today’s businesses has been high on the agenda at the International Union of Marine Insurance (IUMI) annual conference being held this week (Sept 6-10) in Singapore.

It has released an updated set of rules on the management transits involving electric vehicles and lithium batteries with a warning risks will only increase as their use rises.

IUMI secretary general Lars Lange said; “The volume of cars being shipped by maritime transport globally is around 20 million units per annum. EVs have been transported in ever larger numbers since 2017. There appears to be an increasing frequency of fires onboard car carriers although none to date have been found to be solely attributable to an electric vehicle – although it is possible that an EV was the culprit. However, we understand the characteristics of an EV fire are different to those emanating from a standard internal combustion engine vehicle (ICEV) and it is important that carriers, operators and insurers understand the risks involved and the measures that might reduce that risk.”

Ian Summers, Global Business Leader, AdvantageGo.

Chris Hopper, Risk Control Specialist, Marine at insurer Sompo says the industry is well aware of the risks and the need for risk mitigation and adequate coverage.

“The risks associated with lithium-ion batteries and electric vehicles (EVs) appear to be rapidly climbing the marine insurance market’s priority list,” he adds. “Ship fires have increasingly been reported, and fire/explosion has been recorded as the second biggest cause of vessel losses in recent years.

“For example, the Mv Fremantle Highway fire in 2023 involved nearly 500 EVs onboard, and while the exact cause remains under investigation, lithium battery ignition is suspected. In a similar case, the Mv Felicity Ace fire saw the vessel catch fire and sink, with the fact that EVs making up the majority of vehicles on board suspected to be the cause of the incident.”

Hopper says underwriters are already taking steps to tackle the risks.

“In an effort to prevent these incidents, we understand that insurers are requesting pre-shipment battery state of charge (SOC) declarations and an increase in cargo premiums if carrying EVs, along with stricter details on the ship’s manifest to ensure dangerous goods are recorded and that fire detection and suppression systems are present on car decks,” he explained. “There has been much speculation regarding the increasing prevalence of fire on deep-sea vessels and the increase of EV vehicles being shipped.

“There has just been a study conducted by the Swedish Civil Contingencies agencies, concluding that EVs are 20 times less likely to catch fire than a standard petrol or diesel car on the road.”

Hopper continues: “There are a number of aspects that are linked to ship fires, including a high density of vehicles, low deck heights, and the trend of modern vehicles being composed in a larger part of combustible material.

“The biggest issue appears to be if an EV catches fire, it is more difficult to put out than a traditional petrol or diesel vehicle. Historically, ships would put out fires by releasing CO2 and water into the holds. However this technique is ineffective against EV fires, which are fuelled by a chemical reaction that does not need Oxygen to burn.

“They can, however, be extinguished by lowering the temperature to interrupt the self-perpetuating chain reaction of battery overheating and stop the thermal runaway process.”

In terms of what can be done to reduce the risks, Hopper believes it will take a concerted effort from the shipping companies, cargo owners and their insurers.

“There has been some debate about the state of charge requirements for the supply chain, but there is no consensus between manufacturers on what it should be,” he continues. “Ideally, there should be sufficient power for the vehicle to pass through the logistics pipeline to the dealer, without need for charging.

“Before loading, pre-shipment inspections should be carried out to confirm no visible damage or signs of overheating. EVs should be stored apart from other combustion engine vehicles, any dangerous goods or sources of heat.

“In the process of loading vehicles on to vessels, only roll-on roll-off (ro-ro) decks with enhanced ventilation and reinforced deck fire boundaries should be used to prevent and contain any fires. Vessels should also be installed with early warning heat sensors, smoke detectors, and thermal imaging cameras.

“For fire suppression there must be high-capacity water deluge, mist, or foam systems that can target the under chassis areas. They should also be equipped with containment tools like fire blankets that can cover a vehicle, and portable water-cooling units.”

Hopper concludes: “Monitoring is a critical part of this, and the ship’s crew should monitor EV zones for heat buildup, signs of odours or smoke, and use handheld thermal imagers to check no increase in heat spikes from batteries when carrying out routine deck checks.

“If there are any signs of heat spikes or signs of thermal runaway, you should ensure that there is sufficient spacing to move adjacent vehicles away, to enable the start of cooling procedures. It is also important to update crew with regular refresher training, conduct regular fire drills with specific EV firefighting scenarios, to ensure that best practice is followed.”