Lithium-ion batteries create different risks for cargo underwriters, according to International Union of Marine Insurance.
The demand for Lithium-ion (Li-ion) batteries
The demand for Lithium-ion (Li-ion) batteries, driven in part by decarbonisation, is soaring. The market is projected to grow 30% annually from 2022 to 2030 according to McKinsey.
However, Li-ion batteries do have specific hazards. These include fire, explosion, and “thermal runaway”, a rapid self-heating fire that can cause an explosion. Fires in Li-ion batteries can be hard to extinguish.
The same applies to items that contain Li-ion batteries such as electric vehicles. Fires in EVs containing Li-ion batteries require a different firefighting response to control and to extinguish them once started because they can spontaneously reignite hours or days after they have been put out.
For cargo underwriters, this creates different risks, as many electric vehicles containing Li-ion batteries are being shipped alongside conventional cars with internal combustion engines.
A recent example of this was the fire on-board the Felicity Ace in 2022. The fire, which was potentially started by electric vehicles, led to the sinking of the ship and all vehicles on board including $155 million worth of Volkswagen vehicles were lost, according to Russell’s ALPS Marine analysis.
This will no doubt keep cargo underwriters awake at night, for fires on-board vessels remain among the biggest safety concerns for the maritime industry. There were 209 ship fires in 2022, a 17% rise from 2021 according to AGCS.
AGCS analysis of more than 240,000 marine insurance industry claims from Jan 2017 to Dec 2021, worth approximately €9.2bn in value, showed that fire was the most expensive cause of loss accounting for 18% of the value of all claims.
A significant worry for underwriters is that many ships lack suitable fire protection, firefighting capabilities and detection systems to put out large fires at sea. This issue has been exacerbated by the large increase in the size of vessels, meaning there are more items on-board to monitor.
Therefore, it is imperative that the risks of transporting Li-ion batteries are addressed. Cargo underwriters and their clients need to get ahead and pre-empt the risk from Li-ion batteries or face paying a large and hefty bill for burnt cargo.
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