How Project Design Shapes Battery Energy Storage System Insurability

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Battery energy storage systems (BESS) are playing an increasingly important role in supporting grid reliability and the growth of renewable energy. Developers, lenders and insurers are paying closer attention to how these facilities are designed, operated and protected as deployment expands.

Insurance capacity remains available for well-designed projects. In many cases, the difference between a project that attracts strong insurer interest and one that faces additional questions often depends on how risk is evaluated, documented and communicated throughout the development process.

Why battery energy storage risk continues to draw attention

Battery storage has grown rapidly over the past several years, becoming an important part of modern energy infrastructure. As the industry expands, stakeholders across the project lifecycle are working to better understand and manage the unique risks associated with these facilities.

One area that receives particular attention is thermal runaway, a chain reaction that can occur when a battery cell overheats. While thermal runaway remains an important consideration, the industry's understanding of battery storage risks continues to evolve as more operational experience, testing data and loss information become available.

A small number of high-profile incidents have influenced how battery storage projects are perceived. Today, insurers are taking a more informed approach by evaluating the specific characteristics of individual projects, including site design, battery chemistry, spacing, monitoring capabilities and fire protection measures.

Recent testing supports that evolution. A large-scale fire test involving a 4 MWh battery container demonstrated that a fire contained within one unit didn't spread to neighboring containers, even at spacing distances closer than some conservative recommendations. Findings like these help inform discussions around project design and risk management.

Insurability early in the development process

Lenders typically require insurance to be in place before financial close, making insurability an important factor in overall project readiness. As a result, developers benefit from considering risk management and insurance requirements early, which helps streamline conversations and reduce the likelihood of unexpected requirements later in the process.

Supporting project insurability from design through operation

We work alongside developers to help align risk management practices with insurer and lender expectations throughout the project lifecycle.

Technical risk review

We evaluate projects against recognized standards such as NFPA 855 and UL 9540A, reviewing areas including battery chemistry, site layout, fire protection, gas detection, explosion control and emergency response planning.

This review helps identify opportunities for improvement early while design and operational decisions can still be addressed efficiently.

Documentation and risk mitigation support

Clear documentation plays an important role in explaining how project risks have been assessed and managed. We help developers organize information that insurers commonly review, including large-scale testing results, hazard mitigation analyses, site design considerations, gas detection and explosion control measures and emergency response plans.

Where we identify opportunities for improvement, we work with project teams to address them before they become obstacles later in the process.

Early engagement and risk communication

Technical information is most effective when presented in a way that allows stakeholders to understand the project's approach to risk management.

We help translate engineering decisions, testing data and operational controls into clear documentation that supports discussions with insurers and lenders. Engaging these stakeholders early can help align expectations and reduce surprises as projects move toward financial close.

Coverage structuring and market engagement

Battery storage projects often require specialized insurance solutions supported by multiple insurers. We identify carriers with relevant experience, structure coverage to meet project requirements and support discussions that reflect the individual characteristics of the project rather than broad assumptions about the asset class.

Ongoing risk management

Project design, operations and risk management practices shape how insurers evaluate facilities over time. We help clients maintain documentation, support renewal discussions and identify opportunities to strengthen risk management practices as operations evolve.

Potential benefits of a strong risk management approach

Addressing risk management early can provide advantages throughout the project lifecycle, including:

Greater confidence among insurers, lenders and project stakeholders
More efficient insurance and financing discussions
Better alignment between project design and risk-transfer strategies
Earlier identification of operational or risk management gaps
A stronger foundation for long-term project performance and reliability

Factors that can influence insurability

While every project is unique, there are several areas commonly evaluated by insurers when assessing battery energy storage facilities.

These may include:

Battery chemistry and system configuration
Site layout and separation distances
UL 9540 listing and UL 9540A testing results
Hazard mitigation analysis
Gas detection and explosion control measures
Fire protection planning
Emergency response coordination with local authorities
Operational monitoring and maintenance practices

These considerations reflect broader questions about how a project is designed, operated and maintained over its lifespan.

Whether you're evaluating a new battery storage project or preparing for financing and insurance discussions, understanding how risk is assessed can help support a smoother path from development through operation.

Gallagher's energy specialists can help evaluate risk management practices, identify opportunities for improvement and support discussions with insurers throughout the project lifecycle.