Electric vehicle charging infrastructure in Europe: How operators can manage risks effectively – EQ Mag
In Europe, the increase in electric vehicles (EV) sales — one in five new cars sold in 2022 was an EV — has been accompanied by rapid growth in EV charging infrastructure. The market for charging stations in Europe has grown from around 10,000 in 2012 to half a million in 2023. Each domestic market and charging point location presents its own set of risks for charge point operators (CPOs).
CPOs have a lot at stake, as the ripple effect of a single risk event can result in severe financial losses and liability risks. It is imperative that they understand and quantify their risk exposures, formulate 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 CPOs
The four most common types of risks around EV charging infrastructure are property damage (PD), physical and digital business interruption (BI), third-party liability risks, and regulatory non-compliance.
Property damage (PD)
What is your response plan for when property damage occurs?
As the owner and/or operator of physical EV charging assets, you should be aware of the potential sources of property damage, from theft/vandalism to accidental damage from vehicles, as well as fires. Your PD policy’s programme structure must provide you with the flexibility to facilitate expansion to new locations, implement different types and designs of charging points, and select the components used.
Amidst inflation and supply chain concerns, ensure that your PD insurance programme 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)
Do you have plans in place to deal with physical or digital business interruption?
Despite redundancies and backups, your charge point infrastructure can still be exposed to BI losses from events such as a flood, cyberattack, or a key supplier going out of business.
Take a flood for example: Even if your charging stations are undamaged, you may suffer BI losses as end-users cannot access your charge points, or your charge points need to be shut down as a safety protocol.
Third-party liability risks
Are you properly indemnified and insured against product-related failures and liabilities? One way you can do so is by making sure the warranty of your charge point components (such as charging cables) extends to indemnifying you against liability.
Another way is to work with a broker to design programmes that enable you to transfer risks to a stakeholder, such as an extended warranty programme for end-users covering damage to their vehicle arising from charge point usage.
Consider partnering with a broker that has expertise in managing complex liability risk exposures involving suppliers, key business partners, end-users, as well as the general public.
Regulatory and other risks
Is your EV charging infrastructure and business model future-proofed against possible regulation and increasing scrutiny of environmental, social, and governance (ESG) principles? Your enterprise risk management strategy should revolve around resilience and address ESG risks through concrete actions and active engagement with key stakeholders.
With each market having its own unique own set of risk considerations, regulations, and limitations for CPOs, you should conduct a risk portfolio analysis to identify and accurately quantify each market’s 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.
You also can benefit from having a robust crisis management and business continuity plan in place, to safeguard your reputation and prevent further losses when a risk event occurs, such as a cyberattack compromising your end-users’ personal data. This is especially important in the European Union (EU), as personal data is tightly regulated by the General Data Protection Regulation (GDPR) and fines for breaches can be substantial. 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, sufficient insurance capacity is being extended to CPOs in Europe for PD, BI, and third-party liability coverage. In major markets, CPOs (such as real estate owners) have also been able to extend their existing insurance programme 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 charging 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. CPOs in geographies that have a more reliable power supply or lower crime rate 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 (such as 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. CPOs should 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 EV charging infrastructure and potentially improve CPOs’ insurability.
Recent sector loss trends and claims performance
The loss trends and claims performance of CPOs in the region is under scrutiny, and a major loss event, such as from an extensive flood, may impact premium and/or capacity when it comes to PD/BI coverage.
New targets for cyberattacks
As attack surfaces grow, EV charging stations are becoming yet another cyberattack target 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 stations were the “number one emerging attack vector”.
As governments across the world push for a reduction in their CO2 footprint, more EVs are being produced by manufacturers. This requires that governments build a much larger EV charging infrastructure base to support the demand and these larger scale centres will become a focus of cybercriminals. For a single charger, the impact is minimal, however for a centre full of chargers, the impact to property and lives would be much greater.
This further demonstrates why security best practices are key. Any device connected to the internet needs to be part of a risk assessment and regular penetration testing should be conducted to assess vulnerabilities. Regular patching of systems is key in order to reduce the number of incidents and cost of claims made to cover the impact of ransomware attacks.
Pay special attention to risk accumulation
Because CPOs 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, CPOs 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 lifecycle. CPOs can also explore alternative risk transfer programmes — such as captives, treaty-based insurance, and parametric insurance — via their broker.
To effectively safeguard against loss across the EV charging infrastructure lifecycle, CPOs need to use the right risk parameters to determine the exact limits of liability and necessary insurance coverage. The data and insights gained from risk management activities such as physical climate risk modelling and cyber risk assessments 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 EV charging infrastructure a challenging commercial endeavour for CPOs, who must answer vital questions such as:
- Are we overinsured or underinsured?
- How do we scale our EV charging network without accumulating unknown risks?
- 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.