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Electric vehicle charging infrastructure in Asia: How operators can manage risks effectively

This insight article by Marsh reveals the key risks that operators of electric vehicle charging infrastructure face in Asia, and how to mitigate them effectively.
Charging of Electric vehicles

In Asia, the increase in electric vehicle (EV) use has been accompanied by rapid growth in EV charging infrastructure, with the market for charging stations in Asia-Pacific expected to grow annually by 30.8% to reach US$69.6 billion by 2029.  Each domestic market and charging point location presents its own set of risks for charge point operators, or CPOs. 

Operators have a lot at stake as the ripple effect of a single risk event can result in severe financial losses and liability risks. Hence, it is imperative that they understand and quantify the risk exposures, formulate the appropriate risk management policies, and take the right actions to mitigate and transfer their risk exposures while achieving their objectives such as fulfilling government tender requirements, meeting project timelines, and defining limits of liability.

Key risk challenges for EV charge point operators

For operators, the four most common types of risks around electric vehicle charging infrastructure are property damage (PD), physical and digital business interruption (BI), third-party liability risks, and regulatory non-compliance

Property damage (PD)

As the owner and/or operator of physical assets, you should be aware of the potential sources of property damage, from theft/vandalism to accidental damage from vehicles, as well as fires and natural disasters such as typhoons. Your PD policy’s program structure must provide the flexibility for you to facilitate expansion to new locations, types and designs of charging points, and the components used. 

Amidst inflation, currency fluctuations, and supply chain concerns, ensure that your insurance program is well-structured. In particular, assets need to be valued accurately and insured for the appropriate amount to avoid having to bear uninsured losses due to underinsurance when a PD claim arises.

Physical and digital business interruption (BI)

Despite redundancies and backups, your charge point infrastructure can still be exposed to BI losses from events such as a flood, cyberattack, or key supplier going out of business. 

Take a flood for example: Even if your charging stations are undamaged, you suffer BI losses as end-customers cannot access your facilities, or your charge points need to be shut down as a safety protocol. Hence, it is important to get your BI declared values right and obtain adequate BI and Contingent BI coverages for your charge point infrastructure assets.

Third-party liability risks 

Are you properly indemnified and insured against product-related failures and liabilities? One way is to make sure the warranty of your charge point components (e.g. charging cable) extends to indemnifying you against liability. Another way is to work with a broker to design programs that enable you to transfer risks to a stakeholder, such as an extended warranty program for end-users covering damage to their vehicle arising from charge point usage.

Consider partnering with an insurance broker with expertise in managing complex liability risk exposures involving your suppliers, key business partners, end-customers, as well as the general public.

Regulatory and other risks

Is your electric vehicle charging infrastructure and business model future-proof against possible regulation and increasing scrutiny on environment, social, and governance (ESG) principles? Your enterprise risk management strategy should revolve around sustainability and address ESG risks by actively engaging with key stakeholders. 

For your workforce, ensure proper insurance coverage, adopt policies based on the principles of diversity, equity, and inclusion (DEI), and consider the access to innovative, tailored health and benefits program designs via your broker.

With each market having their own unique own set of risk considerations, regulations and limitations for charge point operators, the advice is to conduct a risk portfolio analysis to identify and accurately quantify the risks and potential losses. Failure to do so may result in risk ‘blind spots’ and significant financial and reputational losses that might be difficult to recover from when a risk event does arise.

Operators can also benefit from having a robust crisis management and business continuity plan in place, to safeguard their reputation and prevent further loss when a risk event occurs, such as a cyberattack compromising your end-customers’ personal data. Aside from preventative measures and controls, every leader and employee in your organisation should be given the appropriate scenario-based training and have a clear understanding of their role and responsibilities in a crisis or risk event.

Factors affecting insurability of EV charging infrastructure

At the time of writing, there is sufficient insurance capacity in Asia being extended to operators for PD/BI and third-party liability coverage. In markets such as Hong Kong, operators (e.g. real estate owners) have also been able to extend their existing insurance program to cover EV charging points.

That being said, the ease of placement, pricing, and coverage terms may vary depending on the following factors:

Location and geography of the assets

Electric vehicle charge points in non-urban areas may have a higher replacement cost and may be more susceptible to power outages or damage from extreme weather events. Operators in geographies that have a more reliable power supply or lower crime may be able to access more competitive premiums and terms.

Type of charging technology deployed

High voltage EV charging points may pose a greater public liability risk (e.g. from electric shock). New components or parts from new suppliers may be at a higher risk of failure or defect, especially in cases of backwards integration. Hence, charge point operators need to take contractual liability risk into consideration and de-risk accordingly. 

Risk mitigation measures in place

Placing bollards around chargers to prevent accidental physical damage, installing safety monitoring systems to prevent high-voltage fires, implementing cyber controls to prevent cyberattacks, and choosing sites on higher ground or in low crime areas are all risk mitigation actions that can enhance the risk resilience of electric vehicle charging infrastructure and potentially improve operators’ insurability.

New targets for cyberattacks

As the attack surface becomes bigger and bigger, cyberattacks against EV charging stations are becoming yet another point of attack for hackers. This is also true of hacking the EV itself. Out of more than 100 publicly reported automotive cybersecurity incidents since the start of 2022, EV charging was the “number one emerging attack vector”. 

A 19-year-old in Germany used a third-party app to hack into about 25 Tesla vehicles in more than a dozen countries, revealing the potential cybersecurity vulnerabilities of EV charging station infrastructure. 

As governments across the world push for a reduction in their Co2 footprint, more and more EV’s are being produced by manufacturers. This requires that governments build a much larger EV charging infrastructure to support the demand and these larger scale centres will become a focus of cyber criminals. For a single charger, the impact is minimal, however for a centre full of chargers, the impact to lives would be much greater. 

This further demonstrates why security best practice is key. Any device connected to the internet needs to form part of a risk assessment and regular penetration testing should be conducted, to assess if any vulnerabilities exist or not. Regular patching of systems is key in order to reduce the cost of claims made by companies to cover the cost of ransomware attacks.  

Pay special attention to risk accumulation

Because charge point operators typically partner with a vast network of stakeholders commercially and contractually, this can cause risk to accumulate and losses to amplify if not properly assessed and quantified prior to risk transfer.

First and foremost, operators need to ensure that any backward integration and forward implementation of technology is evaluated for potential business-to-business risks, with the optimal actions identified and taken to manage these risks at every stage of the project life cycle. Operators can also explore alternative risk transfer programs — such as captives, treaty-based insurance, and parametric insurance — via their insurance broker.

To effectively safeguard against loss across the EV charging infrastructure life cycle, operators need use the right risk parameters to determine the exact limit of liability and insurance. The data and insights gained from risk management activities such as physical climate risk modelling and cyber risk assessment for greenfield projects, as well as regular BI reviews and crisis management exercises, can mitigate risk accumulation, unlock access to much-needed financing and insurance capacity, and inform strategies to address residual risk. 

Safeguard your EV charging network investment

The complexity and interconnectedness of risk factors make running an EV charging infrastructure a challenging commercial endeavour for operators, who must answer vital questions such as: “Are we overinsured or underinsured?”, “How do we scale our EV charging network without accumulating unknown risks?”, and “How do I optimise our risk management and insurance practices?

The clarity to take the right action can come with partnering with a market-leading risk advisor and insurance broker with in-depth industry knowledge. Let Marsh help your organisation navigate an evolving EV charging risk landscape with tailored risk mitigation and transfer solutions that empower strategic decisions and business growth.

Is your EV charging infrastructure well-insured?

Schedule a chat with Marsh Automotive and EV representative today.