Many countries, industries and businesses are making firm commitments to reduce their carbon footprint in the coming decades to meet net zero goals. In the shipping industry, for example, shipowners are experimenting with alternative fuel and energy sources to power their vessels, as discussed in our recent article on the journey to net zero in shipping. Similarly, many other industries are looking to green energy sources to reduce the carbon emissions from their products or operations, and thus demand for lithium-ion batteries has soared.   

Global demand for Li-ion batteries is expected to soar over the next decade, with the number of GWh required increasing from about 700 GWh in 2022 to around 4.7 TWh by 2030 (Exhibit 1). This demand will mostly come from China and Europe, with most of the cells likely to be used in the mobility sector. Accordingly, lithium-ion batteries will form a large proportion of carriers’ portfolios in future.

Difficulties of placing lithium-ion battery risks 

As demand for lithium-ion batteries began to increase, we noticed that brokers were struggling to get lithium-ion battery risks placed in the London market. In the cargo sector there has been a degree of caution around insuring lithium-ion batteries due to the common, but perhaps unfair perception that they have heightened fire risk. This fear factor has been driven by circumstances unrelated to the cargo market, and lithium-ion batteries that are being shipped across the world tend to be new, packaged by the original manufacturer and in a low state of charge. Additionally, these batteries can have extremely varied compositions and sizes, which impact their risk profiles. Misunderstandings about lithium-ion battery risks have resulted in a lack of capacity in our market to provide insurance coverage. For those syndicates and carriers who were willing to provide coverage, doing so required a huge investment in time and resources due to the complex nature of the interest. 

We recognised the need to find a solution, to enable lithium-ion battery risks to be placed more easily as demand increases. To do this we needed to undertake extensive research on the complex risks involved and how we could best support the market.
 

Our investigation into lithium-ion battery risks

We first looked to Chubb’s fire engineers and our transportation and property risk management teams. The latter had already published research on lithium-ion batteries, so we were able to learn about the risk profiles involved and create underwriting guidelines. 

As our practice developed and word spread that we were considering lithium-ion battery risks, we were receiving an ever-growing number of inquiries and, eventually, we were leading this business in Lloyd’s. To continue to meet the increasing demand by enabling lithium-ion risks to be placed more easily, we had to decide on our next steps. This led us to create the consortium. 

 The Lloyd’s Lithium Battery Consortium

The Chubb-led consortium comprises 11 syndicates writing business up to $50 million, with Chubb undertaking the underwriting and risk management process on behalf of supporting markets. It provides companies – wherever they are in the lithium-ion battery supply chain – with an insurance solution that they have previously struggled to access. 

Through the consortium, we are looking to ensure that there is capacity available for the industry and we can adapt to the needs of all customers. This includes transit-only business, excess stock, stock throughput, warehouse legal and freight legal liability as required.

 Conclusion

In 2023 we established the Lloyd’s Lithium Battery Consortium in response to a lack of capacity in our market to provide insurance coverage for transporting lithium-ion batteries. The number of lithium-ion batteries being shipped across the globe will continue to increase rapidly over the coming years, and we hope that the consortium will help to facilitate this growth long term.