The risk of fire is taken very seriously, but to date France’s insurers have not yet adopted an official position. Only the International Union of Marine Insurance (IUMI) has published a guide to good practice (1) to take stock of the situation and make recommendations to maritime transport operators (cargo ships, car carriers, ships specialising in the transport of new and used vehicles and RORO (2) roll-on/roll-off ships). What is the state of knowledge?
How are insurers and brokers positioning themselves? “On the period from 2010 to the end of June 2023 experts are recording twenty times fewer fires involving electric vehicles than combustion vehicle fires” explains François Gatineau, Chairman of Mobileese, a consultancy specialising in electric mobility.
“These data, based on Australian research, refer to 500 fires worldwide over this period, for a total of 14 million electric vehicles in circulation. Electric vehicles are safer than combustion vehicles, especially as the cause of a fire is not necessarily linked to the vehicle itself, but to the recharging infrastructure. TheEasyFire has shown that 20% of fires are caused by recharging stations; prevention must focus on this aspect as a priority“.
STATE OF PLAY
Two incidents have cast suspicion of electric batteries without scientific certainty. The fire and subsequent sinking of the “Felicity Ace” in 2022 off the Azores and the Fremantle Highway” in July 2023 off the Netherlands. “Transport insurers do not have a fixed position on the causes of losses linked to lithium-ion batteries,” explains Frédéric Denèfle, President of IUMI and Managing Director of Garex. The only certainty is that fires are a priori more difficult to extinguish; you need techniques, measures and training to put them out. We have seen this in a number of feedback”.
The General Manager of Garex notes: “In the case of the Freemantle Highway in last July, we can’t be certain that it was a lithium-ion battery (3) . It’s complicated to investigate the causes of a fire, as there are many possible causes (electrical faults on the ship, man-made fires, etc.). On the other hand, in a fire involving lithium-ion batteries, the temperature rises to 600 degrees, the batteries burn for a long time, and the fire has to be smothered”.
“To my knowledge, there are no specific obligations and standards for the safe storage of lithium-ion batteries to which insurers refer for damage or fire cover”, explains Jérôme Goy, a partner at Enthémis. As a result insurers find themselves de facto with major claims that are multiplying, without having specific regulations apply. All the more so in the case of neighbouring risks“. When there are no specific conditions or obligations, insurers follow their policy to the letter.
“It cannot be said that the policyholder has not complied with that don’t exist,” says Jérôme Goy. However, we shouldn’t be generalised. In some cases, insurers argue other legal reasons for not to cover the often serious consequences of a claim caused by lithium-ion batteries. This creates difficulties in the relationship, with coverage reservations and refusals inherent in these claims, which generate litigation“.
Especially since the stakes and economic are high. “According to several corroborating sources, during the fire at the Bolloré warehouse in Rouen in January, the economic damage was estimated at €100m“, points out the lawyer. Should differentiate between fires during transport from fires during storage ?
“The storage of batteries in a warehouse is another problem, because the need for insurance is different, notes Paulin Palisse, Head of marine and transport risk underwriting manager at Verspieren. The risk is different because of accumulation of several thousand of batteries in a warehouse”.
Chronicle of a general agent
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DECLARATION OF RISK
“When an incident occurs in a logistics warehouse, we turn to lithium-ion batteries without any certainty that the precise cause is a lithium-ion battery in a vehicle or a lithium battery in a sorting centre” explains Pauline Robbe, Property Damage at Aon. We assume that this is because the fire took longer to extinguish and required a larger quantity of water. In the expert reports, the conclude that there are two or three causes. The lithium-ion battery is never the sole cause of the fire”.
“Given the media coverage of the subject, the head of compensation adds: “We get a lot of questions from our customers. It’s our engineering department that will give them direction and guidelines. Aon is not a mass-market company, but a tailor-made one; we provide answers based on our client’s needs and activity. The prevention department will orient the response according to our client’s activity and will make recommendations in the context of risk visits for property damage. These recommendations can be supplemented in conjunction with the insurer “.
Vigilance is a drastic step to take.
“Insured companies must be very clear about their degree of exposure to fire risks,” warns Jérôme Goy. They need to know whether they are exposed themselves or in terms of neighbouring risks. It is imperative that they discuss this with their board to avoid being accused of not declaring risks. In the absence of specific regulations, companies must define a risk map and be proactive“.
At Aon, clients have “all risks except” damage policies.
“It’s difficult to say that insurers are withdrawing from the market; they continue to insure the risk in logistics warehouses,” summarises Pauline Robbe. Policyholders will be compensated for their losses according to the standard contractual bases. As far as I know, there is no movement in the market to exclude lithium from the causes of damage”.
(1) “Good practices for the transport of electric vehicles. Position paper published 31 August by IUMI.
(2) RORO (Roll-on, Roll-off). These ships are equipped with a mobile access ramp allowing loading/unloading goods by towing them between and the quay.
(3) This 18,500 tonne cargo ship caught fire off the coast of the Netherlands (Wadden Sea) on the night of 25 to 26 July. It was carrying 3,783 cars, including 498 electric vehicles.
3 questions to:
Head of marine and transport risk underwriting at Verspieren
“To have maximum data to refine the risk and transfer it to the market”.
How does the risk of fire from electric vehicles on “car carriers” an issue for the insurance industry?
The Felicity Ace incident in February 2022 highlighted the risks associated with this type of cargo for marine and transport insurers. Before the incident, some operators had fallen victim to telephones/tablets that which could self-combust in aircraft. As a result, airlines banned some of these items from the hold. There is a before and an after Felicity Ace, because it was an entire coach that burnt down. It took days to put out the fire off the Azores.
When it was the cargo ship sank, along with 4,000 Volkswagen vehicles (Bentley, Bugatti). Were the lithium-ion batteries the cause of the fire? The suspicion is strong and it is certainly the cause of the fire, as a significant number of second-hand vehicles were on board. Lithium-ion batteries are more at risk when they are second-hand. Following the sinking of the Felicity Ace, some insurers have informed us that they are withdrawing their transport insurance cover for electric vehicles and also for motorised personal mobility devices (MPMDs): scooters, electric scooters and gyropods.
How do you help your customers deal with these risks?
We inform our customers that lithium-ion electric batteries are a type of goods for which insurers are cautious, or even withdrawing their cover. For the insurer, it’s more a question of prevention than price. We help our transport and logistics customers to know where their goods come from. Are they new or used batteries? Under what conditions do they travel? In general, new batteries charged to 50% of their capacity are less likely to self-combust, even if temperature variations can damage them. We therefore need to analyse the sea and air routes used by transport operators. The more load breaks there are, the greater the likelihood of shocks.
What about the risk of fire when batteries are stored?
Storage is another issue, because the insurance needs are different. The risk is different because of the accumulation of several thousand batteries in a warehouse. One example is the fire that destroyed a warehouse belonging to Bolloré Logistics in Rouen last January. At Verspieren, we work with our customers upstream, so that we have as much data as possible. For an insurer, the issue is not the same if it involves the transport and storage of 100 batteries or 1,000 batteries. The most important thing is to have as much data as possible to refine the risk and find solutions on the market. We know which insurers are prepared to support our customers. In this context, our mission is to explain the state of the insurance market to our customers and prospects.