The transport of electric vehicles (EVs) by sea involves a raft of risks to be considered — and the insurers see the bulk of the risk management resting with the sea carriers and consignors. Our Gallagher experts offer insights on the issues that businesses involved with marine transport of EVs need to consider.
Electric vehicle adoption and popularity growth continues and with the goal of reducing carbon emissions, the market is projected to grow at more rapid rates over the years ahead1.
EVs transported as sea freight out of Germany are already subject to more stringent risk management requirements, with carriers working to reduce the possibility of lithium ion battery fires in transit.
Some auto manufacturers take the position that EVs don't catch fire unless other factors such as proximity to combustible materials are involved and are safe if not tampered with or otherwise wrongly treated.
The thermal runaway that results in EV battery fires is triggered by mechanical, electrical or thermal stress. At the highest concentration of thermal stress — between 80 to 100⁰ Celsius — the vehicles may be prone to catching fire from any external source, and lithium ion batteries burn differently to conventional fuel.
Some of the risk controls for transportation of EVs via sea that can applied include:
Applying loss prevention measures will be critical to obtaining insurance cover for the marine transport of EVs.
Before loading vehicles, all batteries will need to be inspected and tested, covering battery management, dashboard information and interfacing with ports of call.
Vessels too will need upgraded capabilities for the better detection of toxic and explosive gases, and fixed systems for fire suppression before any manual attempts are made. The fire containment compartments should be as small as possible (this has had a huge influence in recent ship fires).
Changes to roll-on, roll-off (RORO) ship designs are likely International Maritime Organization requirements2, which may involve refitting existing vessels. Since the current lifetime of oceangoing vessels is between 25 and 40 years, retrofitting of older ships may be difficult and time consuming.
Regulators and the shipping industry need to work together on updating safety measures around managing the risks of carrying EVs. This would require vessels and carriers to improve safety measures and testing against compliance standards recorded with the Maritime Safety Board.
Some of the factors in play with marine insurance claims are beyond the control of individual companies or even the countries being affected. One example is access to the Red Sea and Suez Canal as attacks by Houthi rebels in Yemen on marine freight vessels have inflated insurance claims for damage to carriers and containers3.
To avoid these areas many carriers are travelling via the Cape of Africa, adding 25 to 30% in terms of delays to sea voyages. Longer journeys raise the risks of general average claims by adding a fortnight to the delivery time to the Asia to Europe run. Steaming at faster speeds may add up to $1 million in vessel bunkers and these costs are passed on to customers, who must also consider gaining approval of loading plans on suitable ships, and assessment of political and security risks.
Fires on board affect ships' electrical systems very quickly and crews of sometimes only a few people are required to keep the vessel operational, even in heavy seas. This necessitates controls on:
Claims for ROROs shipping EVs have been for huge losses4, causing significant concern for insurers who have then been involved with problematic technical and lack of knowledge issues in assessing damage, undertaking appropriate salvage procedures and logistical challenges with accessing large-scale inspection areas.
Toxicity and environmental impacts are also key considerations. Decontamination or cleaning fallout can damage vehicles, which are very expensive to clean.
For the marine transport of used vehicles, which may have a history of unknown damage, insurance terms require the correct declaration of cargo and a review of safety measures including the use of packaging, plus a stipulation that the vehicles are fit for transport.
The Gallagher specialist Marine team advises marine clients on navigating insurance and risk market challenges and changing conditions, as well as providing timely responses and necessary information for assessing the global macro environment and risks — all of which are part of the Gallagher Marine service offering.
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