20 August 2025
The Evolving Perception of BESS Risk and Insurance
From grid stability to clean energy goals, utility-scale batteries are no longer optional - they are essential. But for the insurance market, BESS risk remains under scrutiny. Fire-related concerns, particularly around thermal runaway, continue to influence underwriting appetite, even as technology, design, and risk engineering move forward.
As wind and solar projects become more relied upon, BESS will play a central role in managing the intermittency of renewable generation and regulating the flow of electricity to grids. This sector is essential to the future of clean power generation.
BESS global capacity explosive growth
Utility-scale battery energy storage systems
According to the International Energy Agency (IEA), utility-scale batteries accounted for around 54 gigawatts (GW) of global storage capacity in 2023. In January 2025 alone, a further 5.2 GW/13.8 GWh of grid-scale capacity was added globally.
Global Storage Capacity 2023
January 2025 Addition
13.8 Gwh capacity in just one month
Understanding thermal runaway – real vs perceived risk
While fire risk dominates many headlines surrounding lithium-ion batteries, there are misconceptions about the scale of the risk relative to the growing number of global installations.
Rightly or wrongly, the perception of BESS fire safety has been driven by relatively very few single incidents, the notable outlier being recurring problems at the Moss Landing project in California. In 2022, this indoor facility experienced significant overheating problems that caused the site to shut down, and, more recently, it suffered a catastrophic insurable loss in the region of USD 600M.
Initially, South Korea’s energy storage market experienced a series of fires from 2017 to 2019, with nearly thirty incidents that cast an early shadow over the sector, though many of these early concerns have since faded.
With developers and operators taking a more proactive risk engineering approach, complemented by OEMs’ levelling up the technology, BESS presents a less volatile risk profile than previously imagined. Indeed, US industry sources suggest the incidence rate of battery fires has been decreasing as a percentage of deployments.
Battery performance and safety have improved considerably in the past five years, with the exposure to battery fires also mitigated by more careful design. This includes the shift to outdoor facilities and improved spacing of battery containers, which can limit the spread of fire and provide better access for fire crews.
Underwriters reevaluate based on improved technology and design
Insurers have gained valuable insights from their experiences with battery projects, leading to improved risk perception and more informed underwriting practices. They are recognising the role of facility location and design, and starting to distinguish between projects based on these factors when it comes to the pricing and capacity available.
As battery technology continues to evolve, insurers are adapting by factoring the differences between various types of lithium battery cells and their associated risks into their underwriting decisions. While factoring in improvements in design, overall, they remain more cautious about indoor installations.
These developments have made room for a more nuanced approach to risk – and a broader willingness to insure well-engineered BESS projects.
This knowledge can then lead to more tailored and informed insurance policies that emphasise comprehensive risk management strategies, providing more effective coverage and support for clients in the battery sector.
Evolving suppression strategies can mitigate the destructiveness of BESS fires
Differing approaches to fire risk management are also key. The ‘let it burn’ suppression strategy has gained attention because it minimises risk to human life by reducing the danger of explosions when opening containers. This allows insurers to quantify the loss of a single unit or grouping of units, coupled with large-scale burn tests becoming prevalent.
Another factor governing the fire risk of BESS facilities is the control of battery cells. Battery management software can continuously monitor cell temperatures to ensure they stay within manufacturers’ warranty limits, shutting them off when limits are exceeded to prevent overheating and potential thermal runaway.
Insuring the future of BESS as the technology matures
Operators are also advised to improve their risk profile by locating such facilities away from high-value third-party assets, such as residential, commercial and industrial sites.
Underwriters are more likely to be cautious towards a risk if the spacing between containers or grouped units is less than the typical 2-3 metres. However, with varying layouts, insurers can take a view on whether adequate spacing has been provided between grouped units. In such scenarios, the probable maximum loss for a fire would be assessed for four grouped units instead of one, for instance.
We advise on sharing the proposed site layouts with us as early as possible for insurability guidance.
AI-based monitoring and predictive analytics are significantly reshaping insurance underwriting in the BESS industry.
A breakdown of innovations
Improved Risk Assessment and Predictive Analytics
AI-powered monitoring systems collect real-time data on temperature, voltage, current, humidity, state of charge (SoC), and state of health (SoH) of battery cells. This data allows insurers to model risks more accurately, particularly around thermal runaway, future degradation, fire risk or explosion and predicting failure patterns.
Loss Mitigation/Reduced Claims
AI monitoring enables early warning systems for anomalies, which can trigger preemptive maintenance, automated system shutdown, and fire suppression activation. This reduces the frequency and severity of claims, which could directly impact loss ratios, making the BESS segment more insurable.
Data-Driven Insurance Products
While it is still in its infancy, some insurers have begun offering performance-based insurance models, where premiums are tied to system performance or ongoing operational health. Policy terms evolve based on AI-monitored risk indicators and are similar to telematics-based auto insurance models, but for energy systems.
There are several other innovations as well – Dynamic, Usage-Based Underwriting and Enhanced Actuarial Modelling – that are influencing underwriting decisions and risk management.
It is also worth noting that the renewable energy sector presents unique challenges and opportunities for insurers. Those carriers that adapt to new technologies and risks can gain a significant competitive edge in the renewable energy insurance market.
Insurers that invest in understanding the latest renewable energy technologies are also better positioned to design more accurate and tailored insurance products that meet the specific needs of renewable energy companies as they innovate and grow.
Gallagher’s role in BESS
Gallagher has been involved in numerous battery projects globally, working with notable clients. While the battery sector initially faced challenges due to safety concerns, such as thermal runaway incidents, perceptions have since improved, and Gallagher is well-positioned to guide risk management for projects navigating the evolving sector movements and insurer expectations.
Our experience across both utility-scale and commercial BESS projects means we can help clients pre-empt insurer concerns and secure optimal cover in a changing market.
Future outlook
Looking ahead, with improved battery technology and the careful siting and layout of facilities, the BESS industry will continue to steadily reduce its exposure to fire risk, making it increasingly attractive to investors and insurers alike. Effective monitoring and control of battery performance and safety will continue to play an important role, with AI and IoT sensors among the technologies proving transformative in this area.
Insurers that embrace technological advancements and proactively address the unique risks of the renewable energy sector can differentiate themselves in the market. By offering specialised products, leveraging data-driven insights, and aligning with sustainability goals, these underwriters will be best positioned to capture new business opportunities and establish themselves as leaders in this exciting and growing industry.
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