Chubb Collaborates with Lloyd's Consortium to Tackle Lithium Battery Risk

A consortium has been established to address a critical gap in the marine cargo insurance market concerning the transit and stock coverage of lithium batteries. With limits of up to $50 million, this consortium offers a comprehensive solution for various risk types associated with lithium batteries. These risks include transit-related issues, stock throughput concerns, standalone stock insurance, and warehouse legal liability. Furthermore, it will encompass coverage for excess stock and partial orders, providing a holistic approach to mitigating the unique challenges posed by lithium batteries in transit and storage.

Lithium-ion batteries, while widely used for their energy density and efficiency, present significant risks that have become increasingly apparent in recent years. One of the most pressing concerns is the potential for toxic gas emissions in the event of a lithium-ion battery fire. These fires can occur suddenly and without warning, leaving little time for response or mitigation efforts. The rapid and often uncontrollable spread of such fires has led to devastating consequences, particularly in scenarios involving electric vehicles (EVs) on ships and within various segments of the supply chain.

TT Club, an organization specializing in insurance and risk management for the transportation and logistics industries, has highlighted the critical dangers associated with lithium-ion batteries. Their warnings underscore the need for specialized insurance coverage to address these risks adequately. In particular, TT Club has emphasized the unpredictability of battery failures, making it challenging to anticipate and respond to potential warning signs effectively.

Chubb Global Markets (CGM), as the driving force behind this initiative, is well-positioned to lead the consortium. The company's commitment to addressing climate-related risks is evident through the launch of Chubb Climate+ earlier in 2023. Chubb Climate+ is a global business unit dedicated to addressing the multifaceted challenges posed by climate change. This demonstrates CGM's proactive approach to developing innovative insurance solutions that not only protect businesses but also contribute to environmental sustainability.

The need for specialized insurance coverage for lithium batteries extends beyond their prevalence in consumer electronics to encompass a wide range of industries. Electric vehicles, renewable energy storage systems, and various industrial applications increasingly rely on lithium batteries. As the use of these batteries continues to grow, so does the need for insurance solutions that can adequately address the associated risks.

The consortium's introduction is a positive development in this regard, as it offers a centralized and comprehensive approach to lithium battery risk management. This approach provides peace of mind for businesses involved in the transportation, storage, and utilization of lithium batteries, knowing that they have access to substantial insurance coverage and expertise specifically designed to address the unique challenges these batteries present.