By Ichiro Seino ,
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.
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.
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.
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.
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.
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.
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:
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.
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.