In 1688, more than 300 years ago, underwriters in a London coffee shop organised the earliest known Lloyd’s insurance contract for a ship that set sail from London to Jamaica. Today, marine insurance underwriting principles - and even the policy documents themselves - contain clauses that are decades, even centuries old. Yet, in the traditionally conservative world of marine insurance, the industry is being forced to rewrite the rulebook in response to a modern peril: the explosive fire risk posed by lithium-ion batteries. These energy-dense batteries, now ubiquitous in modern electric vehicles (EVs), are shipped in colossal volumes aboard mega-sized container ships and car carriers, raising the stakes for catastrophic loss at sea.
A chilling illustration of this rising risk unfolded in June, when the 600-foot car carrier Morning Midas erupted in flames a few hundred miles off Alaska’s coast. The vessel, laden with more than 3,000 vehicles, saw disaster strike when a fire broke out on a deck loaded with EVs. According to news reports, the inferno rapidly escalated beyond the crew’s control, forcing all 22 seafarers to abandon ship. The fire raged for weeks, ultimately sending the Morning Midas and its entire cargo of 3,048 vehicles to the bottom of the Pacific.
Authorities and maritime experts pointed to the lithium-ion batteries in the EVs as the likely trigger for the fire - but the exact cause remains under investigation.
Brokers have told Insurance Business that every single week there are now four or five fires or explosions on board a vessel somewhere in the world. When this involves lithium-ion batteries, the risk can be catastrophic losses because these fires are very hard to extinguish, particularly at sea.
“Fires on ships that are carrying EVs can be very significant because you can see total destruction of the vehicles that are on there,” said Guy Worsley, marine insurance specialist with Rothbury Insurance Brokers.
The scale of losses is staggering, even though these battery-driven fires still make up a relatively small proportion of all shipboard blazes.
“It's not the frequency of the event, it's the severity. If you've got cargo on a ship that starts to burn, or you've got a commercial vessel or a pleasure craft that starts to burn, you've got a severe loss right from the outset,” said Worsley.
In response to this intensifying threat, regulatory bodies, such as the International Maritime Organization (IMO), have issued new, more stringent guidelines for the safe transport of lithium-ion batteries, including tighter requirements for cargo declaration, stowage and fire detection systems.
But the insurance industry is not waiting for regulators to catch up. Insurers have already begun overhauling marine insurance contracts, now demanding exhaustive documentation of battery shipments and proof of compliance with international safety codes. Brokers are reporting a surge in exclusions related to lithium battery fire risk, with some insurers even shifting liability on to manufacturers.
“There are some insurers who are issuing policies with warranties that insist such things as lithium batteries are handled according to manufacturer’s guidelines and including using OEM chargers,” said Worsley. “It's really starting to ramp up in terms of insurance risk surveyors' awareness of lithium as a catalyst for fires,” he said.
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