Allianz Commercial

Lithium-ion batteries
Emerging Risk Trend Talk 1
Emerging risks have unique characteristics that require electrolytes. If damaged or incorrectly charged, Li-ion
specialist technical, management and organizational skills. batteries’ high temperatures can lead to explosions and
Our Risk Consulting expertise across different industries fires, as has been seen with a number of recent incidents
and lines of insurance business around the world is key to on land and at sea.
helping companies understand and mitigate these. In our
Emerging Risk Trend Talk series, we address such topics, Unlike lithium batteries, Li-ion batteries do not contain
highlight loss events and look at targeted loss prevention lithium metal, which is highly combustible and reactive
measures. with water. Water is currently the best medium to fight a
Li-ion battery fire due to its effective cooling capabilities.
However, these fires can be very difficult to extinguish and
The risk can reignite hours, days or weeks later unless their stored
energy has been completely discharged.
A lithium-ion (Li-ion) battery is a type of rechargeable
battery used to power a wide range of consumer and
electronic goods, as well as electronic vehicles (EVs). They
are also widely used in grid-scale energy storage and
aerospace applications.

Compared to other rechargeable battery technologies,

Li-ion batteries have high energy densities, low self-
discharge, and no memory effect. They have a Battery Hazards to watch
Management System (BMS) which can monitor not
only the State of Charge (SoC) of the battery but also The main hazards associated
the conditions of the cells and modules. The BMS with Li-ion batteries are:
acts as a safety back-up if conditions are outside the
normal parameters and will shut down the device. For – Fire: electrolyte is an ignitable liquid.
larger applications, such as a Battery Energy Storage – Explosion: release of ignitable vapor
System (BESS), an Energy Management System (EMS) in a confined space.
with integrated thermal management and monitoring – Thermal runaway: rapid self-heating
processes is utilized to track the entire system. that may cause fire or explosion.
– Poisonous/Toxic gases:
Li-ion batteries can be a safety hazard if not properly released during these events.
engineered, manufactured, transported, installed,
charged, and stored because cells have flammable
 Lithium-ion Batteries Emerging Risk Trend Talk 1 | Allianz Commercial

Photo: Willie Cade

Property
Event Summary Allianz Risk Consulting Risk Mitigation
and Loss Prevention Measures
A fire broke out at an old 70,000 ft2 paper production
facility in Illinois, USA. The facility reportedly contained 1. Store and handle Li-ion batteries in an appropriate
approximately 100,000 new and used Li-ion batteries; location and conditions in accordance with
50,000 damaged, defective or recalled Li-ion batteries; manufacturer’s recommendations. Inadequate storage
30,000 nickel cadmium batteries and 10,000 nickel metal conditions can often contribute to the cause of such
hydride batteries at the time of the blaze. It was poorly fires.
maintained and sprinkler protection was not in service. 2. Remove all damaged or defective Li-ion batteries from
buildings and store outside, away from other buildings,
Firefighters responded to the fire shortly after it broke out in properly-designed containers.
and initially attempted to suppress it with water but were 3. Provide adequately designed automatic sprinkler
unsuccessful. They then attempted to extinguish it using a protection in accordance with recognized standards,
dry chemical extinguishing agent, which also failed. Once including a strong water supply (flow, pressure and
the fire had diminished to a controllable level after several duration) and manual hose streams. This can help to
days, firefighters applied high-flow water and tons of dry control a Li-ion battery fire inside a building.
Portland cement to smother the burning batteries. The 4. Ensure the public / private fire brigade is adequately
fire was finally extinguished two weeks after it broke out trained and equipped to fight a Li-ion battery fire.
but resulted in a total loss to the building and its contents. Applying large amounts of water can cool a fire and
The cause was attributed to a short circuit in the Li-ion help gain control.
batteries. 5. Develop and maintain adequate pre-emergency
planning with the public / private fire brigade, including
removal of involved Li-ion batteries to a safe location
(preferably outdoors). In this incident no pre-emergency
planning was in place for a Li-ion battery fire and the
fire brigade had not been notified that Li-ion batteries
were being stored.
Natural Resources and Construction (page 3) and MidCorp (page 5)
topics are applicable for Property too
 Lithium-ion Batteries Emerging Risk Trend Talk 1 | Allianz Commercial

Natural Resources and Construction

Event Summary Allianz Risk Consulting Risk Mitigation
and Loss Prevention Measures
A fire broke out at a large-scale battery storage site in
Australia. A single container-based Battery Energy Storage
System (BESS) unit caught fire and spread to a 1. Ensure all related systems and equipment are installed to
neighboring container. The fire did not spread beyond these manufacturers’ guidelines / recommendations. Maintain
two units and eventually burned itself out over six hours. all records of installation. Ensure operation of equipment
remains within parameters provided to and by equipment
A liquid coolant leak caused thermal runaway in battery manufacturers is complied with as this is essential to
cells. It is important to note that some of the circumstances ensure that equipment warrantees are not voided.
which caused the fire are unlikely to be repeated when 2. Provide and maintain records of fire protection, security,
these systems are operational. As the unit in question was and operations and maintenance (O&M) concepts,
undergoing testing it had been manually disconnected Supervisory Control and Data Acquisition (SCADA)
from some of the monitoring, control and data collection systems and site layout plans. Provide training, and
systems that it would usually be connected to. High wind documentation of these to all applicable personnel.
conditions also contributed to the fire’s propagation, 3. Ensure the public / private fire brigade is adequately
despite the units being properly spaced apart as per trained and equipped to fight a BESS fire.
requirements. After this event the Original Equipment
Manufacturer (OEM) implemented a number of
improvements, including improved inspection procedures
for coolant systems, as well as the addition of more alarms.
 Lithium-ion Batteries Emerging Risk Trend Talk 1 | Allianz Commercial

Marine
Event Summary
An intermodal freight container reportedly loaded with
computer parts was being transported by highway from
Raleigh, North Carolina to the Port of Virginia in the US
for loading to a container vessel for transport to a port
in China. The cargo caught fire on the highway while in
transit resulting in the loss of the cargo and significant
damage to the intermodal freight container.

The responding fire department determined that the heat

produced from the fire burned hot enough to burn a hole
through the metal container’s structure. A subsequent
investigation determined the actual cargo was illegally-
loaded discarded lithium batteries, not computer
parts. This mis-declared/undeclared shipment put first
responders at risk, and could have been potentially
catastrophic if the freight container had been loaded
to the vessel prior to catching fire. A probable cause
was residual charge remaining in improperly-prepared
undeclared lithium batteries.

Allianz Risk Consulting Risk Mitigation

and Loss Prevention Measures Photo: USCG Marine Safety Alert 01-22

1. Establish standard operating procedures (SOP)

and protocols to ensure all hazardous material
(dangerous goods) shipments are in full compliance
with all domestic and international applicable hazmat
regulations. Including, but not limited to:
a. Employee hazmat training
b. Proper packaging of the hazmat (new, used, or
recycled lithium (all types) batteries)
c. Proper markings, labels, and placarding
d. Proper declarations and certifications.
2. Transport Li-ion batteries at a maximum SOC (state of
charge) of 30%, unless otherwise approved.
3. Dropped, or otherwise damaged packaging of Li-ion
batteries should not be transported.
4. Properly handle, store, and transport Li-ion batteries in
accordance with manufacturer’s recommendations and
in compliance with dangerous goods regulations.
5. When applicable, ensure pre-emergency contingency
plans are developed and shared with local first
responders for Li-ion batteries in temporary storage, as
part of their transportation.
 Lithium-ion Batteries Emerging Risk Trend Talk 1 | Allianz Commercial

Photo: Jim Biram, Resco Properties

MidCorp
Event Summary Allianz Risk Consulting Risk Mitigation
and Loss Prevention Measures
A fire broke out in a tenant-occupied space in a five-unit
commercial warehouse building in California, USA. The 1. Understanding of insured / management risk transfer
tenant operated an electric bicycle and scooter import should be a high priority. Review the Executed Lease
and repair operation. The definite cause of the fire is to ensure adequate risk transfer language is in place
unknown due to the amount of destruction to the building (‘Indemnity’, ‘Hold Harmless’ and ‘Additional Insured’).
but is thought to have originated from a work bench that A copy of the current Certificate of Insurance (COI)
contained numerous Li-ion batteries and chargers. should be maintained on file, with limits equal to or
greater than own.
As the tenant did not have adequate insurance, the 2. Automatic Sprinkler Protection should also be a high
hazardous material clean-up of the batteries fell to priority. Install throughout the building based on
the warehouse owner, who did. More than 1,000 Li-ion occupancy.
batteries needed to be separated from the debris and 3. Store, handle and use Li-ion batteries and chargers in
properly disposed of as per Environmental Protection accordance with manufacturer’s recommendations.
Agency (EPA) guidelines. As the batteries continued 4. Provide at least annual training to all employees to
to explode and catch fire, a 24-hour fire watch with a promptly recognize and respond to any observed
manned water truck was required. The approximate cost hazards involving the storage, use and handling of
of the fire watch and hazardous material disposal was Li-ion batteries. Any damaged batteries should be
close to $2mn. removed from the building immediately.
5. Ensure the public / private fire brigade is adequately
trained and equipped to fight a Li-ion battery fire.
6. Develop and maintain adequate pre-emergency
planning with the fire brigade, including removal of
involved Li-ion batteries to a safe location (preferably
outdoors).
 Lithium-ion Batteries Emerging Risk Trend Talk 1 | Allianz Commercial

Liability
Event Summary Allianz Risk Consulting Risk Mitigation
and Loss Prevention Measures
Between 2020 and 2022 five major automotive
announcements resulted in requests for a minimum of 1. BMS (Battery Management System) must shut off quick
360,000 electric vehicles (EVs) in the USA and Germany charging in harsh environments.
to be recalled because of safety concerns involving Li-ion 2. Ensure direct monitoring of all cell temperatures via BMS.
batteries. 3. Operators should closely consult and follow EV and
battery instruction manuals.
Automobile manufacturers impacted included GM Motors1 4.* Conduct full diagnosis on the cell level for batteries in
and Hyundai2 , which recalled cars due to the risk of high- use on a regular basis.
voltage battery packs catching fire and Ford3, because
of the risk that the high voltage battery’s main contactors * Due to the potential danger posed by ‘thermal runaway’,
could overheat, resulting in a loss of propulsion power, especially after several charging cycles under harsh
potentially increasing the risk of a crash. conditions, Allianz Risk Consulting supports the idea
that all owners and operators of EVs should have such
Meanwhile, VW4 flagged an issue that battery cells could diagnoses every two to three years, as well as after
show an increased self-discharge due to a manufacturing events such as an accident or crash, and before events
defect and asked owners of certain models around the such as the sale of a vehicle, transportation by sea or if an
world to visit workshops. EV is to be regularly parked in garages. Such diagnoses
can be carried out by original equipment manufacturers,
testing organizations or independent suppliers.

Five major recalls of EVs announced in USA and Germany (2020-2022)

Risk Year OEM Model Tier 1 Supplier Sources of recall information
Vehicle fires 2020/2021 GM Bolt / Opel Ampera LG ES (KOR) NHTSA 20V701, 21V150, 21V160 (GM)
Recall (minimum) KBA Code: 10384 (Opel)
161,000 cars worldwide
Vehicle fires 2021 Hyundai Kona / Ioniq Mobis (KOR) NHTSA none
Recall KBA Codes: 10314, 10643
108,000 cars worldwide
Loss of power 2022 Ford Mustang Ford (USA) NHTSA 22V412 (mainly sold in the US)
Recall (minimum) Mach e KBA Code: none
50,000 cars worldwide
Short circuit 2021 Polestar 2 Lear Automated NHTSA 21V109 (Volvo), 21V110 Polestar
Recall (minimum) Volvo XC 40 Electronics KBA Code: 10617 (Polestar)
34,200 cars worldwide Recharge (CHN)
Too deep discharge 2022 VW LG Chem (POL) NHTSA 22V162 (US vehicles only)
Recall / Action ID.3 and ID.4 KBA Codes: none (voluntary action)5
10,000 cars worldwide

Source: Recall data bases from the National Highway Traffic Safety Administration (NHTSA), USA, and KBA, Germany

1 N
 HTSA, Consumer Alert: GM Expands Recall, All Chevrolet Bolt Vehicles Now Recalled, August 20,
2021. NL Times, Opel recalls all Ampera-e models; battery could go up in flames, August 21, 2021
2 FleetNews, Hyundai recalls electric cars due to battery fire risk, February 25, 2021
3 Reuters, Ford recalls 49,000 US Mach-E EVs over potential power loss, June 14, 2022
4 Electrive.com, Possible battery problem with 10,000 VW ID.3 and ID.4, September 26, 2022
5 Auto Motor Und Sport, VW ruft gut 10.000 ID.3 und ID.4 in die Werkstatt, October 4, 2022
 Lithium-ion Batteries Emerging Risk Trend Talk 1 | Allianz Commercial

Conclusion
0-3 years / 4-10 years / >10 years
Timeframe to emerge All lines of business/industries: 0 to 3 years
Liability: 10 years on end of life products

Low / Medium / High

Property: Medium
Natural Resources and Construction: Medium (BESS becoming more standardized)
Marine: High (General Average claims)
Impact on Insurance
MidCorp: Medium
Liability: Low-High
The assessments in this table are based on the level (and severity) of potential claims activity that could
emerge from this emerging risk.

Low / Average / High / Very High

Inherent hazard per line of business / industry
Property: High
Natural Resources and Construction: Average
Allianz Risk Consulting Marine: High to Very High
Assessment MidCorp: High
Liability: High to Very High
The assessments in this table are based on a combination of the ‘time frame to emerge‘ and ‘impact on
insurance‘ criteria with the result being the inherent hazard per line of business / industry sector for this
emerging risk.
 Lithium-ion Batteries Emerging Risk Trend Talk 1 | Allianz Commercial

Further information and contacts

For more detailed information on any type of Li-ion battery please
contact your regional Allianz Risk Consulting risk consultant(s).

commercial.allianz.com
Email: [email protected]

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The material contained in this publication is designed to provide general information only. Projections are inherently subject to substantial and numerous uncertainties and changes. Inevitably, some assumptions
will not materialize, and unanticipated events and circumstances may affect the projections made in this publication. While every effort has been made to ensure that the information provided is accurate, this
information is provided without any representation or warranty of any kind about its accuracy and Allianz Global Corporate & Specialty SE cannot be held responsible for any mistakes or omissions.

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Cover image: Willie Cade