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The electrification of industries (to replace fossil fuel sources with an electricity-based energy source) and the growing reliance on lithium-ion batteries have brought significant advancements in technology and sustainability, but these are accompanied by new risks to manage.

The growing risks are associated with lithium‑ion batteries as industries increasingly adopt electric vehicles (EVs), portable electronics and battery‑powered equipment. The incidence of fires linked to lithium‑ion batteries is rising globally due to factors such as improper storage, physical damage, manufacturing defects and thermal runaway.

This article explores three major risk exposure areas:

  • Stockpiling of battery-powered goods
  • The second‑hand trade of EVs and battery-powered products
  • Marine and freight transport of EVs

Each risk can lead to significant fire, environmental and business interruption losses.

With regulatory requirements tightening and insurance claims for battery fires increasing, there is a need for businesses to adopt robust risk management practices and consider tailored insurance solutions to protect against emerging electrification-related risks.

What to understand about lithium-ion battery fires

Incidents of lithium-ion battery-related fires are increasing worldwide, with significant implications for property damage, business interruptions and environmental remediation costs. Awareness of these exposures is key to businesses being able to implement appropriate risk mitigation measures.

Improper storage conditions (e.g., confined spaces, high temperatures, physical damage to the battery or charger) can lead to thermal runaway. The speed and intensity of thermal runaway is a critical factor in lithium-ion battery fires. These incidents are becoming more frequent due to the growing popularity of portable electronics, EVs and other battery-powered devices. These fires are particularly dangerous because of their intensity, self-sustaining nature and rapid spread.

Understand the main risk factors behind lithium-ion battery fires

With safer handling and awareness of the risks, it's possible to utilise the benefits of electric devices and reduce the downsides of increased fire exposure. Some key causes of battery fires include the following:

  • Overcharging: Using non-compatible chargers or leaving devices unattended during charging can lead to overheating.
  • Physical damage: Batteries damaged during use, transport or storage are more likely to ignite. Inspect batteries regularly for signs of damage or heat.
  • Manufacturing defects: Quality issues during production can result in unstable battery cells, so avoid buying 'bargains'.
  • Environmental factors: Exposure to high temperatures or saltwater can trigger chemical reactions leading to fires or explosions.

Three important risk areas for lithium-ion battery exposures

Stockpiling trends and warehouse fires

In response to the supply chain and trade/tariff uncertainties, many businesses are stockpiling goods, including lithium-ion battery products, in warehouses, ports and industrial parks. This practice increases the concentration of goods at risk in single locations.

While stockpiling can mitigate supply chain disruptions, it also amplifies the potential for significant losses in the event of a fire. According to Gallagher global research, 90% of businesses use or plan to use stockpiling strategies. At the same time, a quarter admit they're unprepared for the associated lithium battery risks.

Second-hand trade and damaged batteries

As consumers upgrade previous purchases, the trade in second-hand EVs and battery packs enables damaged or low-quality batteries to enter circulation. Buyers of used EVs or battery packs are unaware of their history, including potential damage from previous accidents.

Damaged or substandard-manufacture batteries are more prone to thermal runaway, posing significant risks in urban areas, multi-use buildings and public spaces with charging stations. In Sydney, electric bikes or scooters were responsible for 100 building fires in 2025 due to second-hand purchases or inappropriate charging1.

Marine and freight transport risks

Lithium battery risks extend to marine cargo, as highlighted by the sinking of the Felicity Ace, a roll-on/roll-off carrier ship carrying over 4000 vehicles2. Lithium-ion battery fires were a contributing factor to the incident, underscoring the challenges of transporting these products by sea.

Five essential safety tips for transportation or carriage of EVs

Transport operators and freight cargo companies providing carriage of EVs both globally and locally in Australia can adopt risk mitigations around five key issues identified as causes of EV incidents.

Businesses have an essential role in following best practice guidance and promoting the safe use, transit and storage of lithium-ion batteries. To reduce the risk of fire and protect people and property, businesses should:

  • Encourage outdoor battery charging, away from buildings, wherever feasible
  • Supervise indoor charging and use fire-resistant charging cabinets
  • Keep flammable materials away from charging stations
  • Inspect batteries regularly for signs of damage or heat
  • Replace batteries before they reach the end of their recommended lifespan
  • Be aware of airline restrictions on using or charging power banks in flight
  • Use only original equipment manufacture (OEM) chargers
  • Create an emergency response plan and train staff in fire safety procedures

Stay alert for updates in regulations around lithium-ion batteries

Governments and regulators are introducing stricter guidelines for the use, transport and storage of lithium-ion batteries, creating new compliance conditions to be met.

According to the classification of the International Maritime Dangerous Goods Code (IMDG Code)3, lithium batteries are classified as dangerous goods, with highly specific requirements for transport.

Businesses involved with importing or transporting lithium-powered batteries or vehicles are also required to comply with local and international regulations for storage and handling. This includes proactive management of the potential for chemical leaks and contamination if batteries are damaged or improperly disposed of.

The role of insurance protection

Insurers are reporting an increase in high-value claims involving lithium-ion battery fires, with one Australian insurer revealing that the cost of battery fire claims has nearly doubled over five years4.

The implication for businesses is to review insurance coverage with your broker, check sums insured and take potential battery fire damage costs into account. At Gallagher, our insurance experts can help your business navigate potential exposure and ensure your insurance program coverage is adequate.

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Sources

1"Firefighters latest warning after battling 100th e-bike/e-scooter battery blaze," 11 Network Australia, 28 Nov 2025.

2"Massive cargo ship Felicity Ace, laden with luxury cars bound for US, sinks in mid-Atlantic," ABC News, 2 Mar 2022.

3"Shipping Requirements for Lithium Battery Dangerous Goods," CargoesPi, assessed 12 Mar 2026.

4Rayner, Tristan. "Insurer flags rising home fire costs as lithium-ion battery incidents increase," pv magazine, 18 Aug 2025.

Disclaimer

Gallagher provides insurance, risk management and benefits consulting services for clients in response to both known and unknown risk exposures. When providing analysis and recommendations regarding potential insurance coverage, potential claims and/or operational strategy in response to national emergencies (including health crises), we do so from an insurance and/or risk management perspective, and offer broad information about risk mitigation, loss control strategy and potential claim exposures. We have prepared this commentary and other news alerts for general information purposes only and the material is not intended to be, nor should it be interpreted as, legal or client-specific risk management advice. General insurance descriptions contained herein do not include complete insurance policy definitions, terms and/or conditions, and should not be relied on for coverage interpretation. The information may not include current governmental or insurance developments, is provided without knowledge of the individual recipient's industry or specific business or coverage circumstances, and in no way reflects or promises to provide insurance coverage outcomes that only insurance carriers' control.

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