Veronica Assandri Foldnes, global head of commodity & energy transition finance, and Christofer Lindholm, senior risk engineer, at Swiss Re Corporate Solutions, address the challenges of the burgeoning electric vehicle industry, where insurance plays a pivotal role in mitigating risks and thereby supports the global energy transition.


The transportation and mobility sector stands out as one of the most carbon-intensive segments of the economy, contributing to over 18% of total global CO2 emissions in 2022. Encouragingly, the industry is actively tackling this issue by embracing cleaner mobility solutions, such as electric vehicles (EVs).

The EV industry is projected to experience substantial growth, with an expected annual increase of more than 17.8% worldwide over the next seven years. Despite this optimistic trajectory, the development and widespread adoption of EVs face numerous hurdles, including the significant challenge of scaling up battery production to meet the rising demand.

Battery manufacturing plants, commonly referred to as gigafactories, face considerable risks owing to their extensive size, intricate processes, novel production methods and the high-value nature of their products. In addressing these challenges, insurance plays a crucial role in mitigating risks and providing a safeguard for the manufacturing industry. This, in turn, facilitates the sector’s ability to contribute significantly to the ongoing global energy transition.


Q: How can a gigafactory project be insured today?

Assandri Foldnes: There are multiple ways Swiss Re Corporate Solutions supports the various stages in the entire EV battery supply chain. Our commodity & energy transition finance team, which is part of the Credit & Surety business unit, partners with banks to finance the construction and operation of the gigafactories. We offer unfunded risk participation solutions to protect the banks against defaults. We also provide credit risk insurance for the other steps of the value chain: from first extraction of the raw materials to the trade along the way and the final EV sales.

Lindholm: Our risk engineering team provides insights and advice from a technical point of view, helping to reduce the project risk by creating awareness and suggestions for risk mitigation measures. For operational projects, we look at how a factory has been built – which materials have been used, what the fire separations are and so on. The operations and processes are examined in detail to see if there are ways to minimise the risk of adverse events. In addition, protection measures also play a role in the event of a failure of the safety measures built into the process, so that a catastrophic event can be avoided.


Q: Which key aspects do you consider when looking at a gigafactory project?

Assandri Foldnes: From a credit perspective, the gigafactory sector is a key growth area for us. We assess each gigafactory project on its merits such as (i) strength and experience of sponsor(s) and other parties involved (for example, contractors), (ii) strong economic and strategic rationale for the project underpinned by an offtake contract, (iii) clear supply plan for raw materials, and (iv) quality and cost competitiveness for the batteries produced. Likewise, it is key to understand the competitive landscape and industry trends.

Lindholm: We assess gigafactories from multiple angles. We would look at the different processes taking place in the factory and evaluate the associated risks and how they are mitigated. To give you an example: batteries can be prone to catch fire or certain processes tend to have a fire risk exposure. These risk factors can be partially mitigated by (i) the use of non-combustible construction materials, (ii) a good factory layout, and (iii) active fire extinguishing measures.

Furthermore, due to the large size of these factories and since some of the processes are very delicate in their nature, we often see a differentiated approach when it comes to fire evacuation. A detailed and smart fire strategy is very important for plants to work as intended.


Q: How does the gigafactory’s procurement plan of critical battery components influence your insurance decision?

Assandri Foldnes: This is a critical aspect. The gigafactories have different needs for raw materials depending on the battery’s composition (for example, lithium, cobalt, manganese and graphite). These raw materials can be scarce with varying outlooks on supply and demand, especially with competition among battery manufacturers to ramp up their production. Furthermore, the extraction of such raw materials is subject to complex geopolitical forces and ESG considerations. In this context, a clear procurement strategy with creditworthy and experienced suppliers plays an important role when defining appetite for a particular gigafactory. Our years of experience in providing credit insurance to the metal and mining industry give us profound insights into these supply risks.

In parallel, we are seeing promising stand-alone projects and gigafactories with comprehensive battery recycling strategies with the intention of recovering essential raw material and reusing it to manufacture new batteries, which alleviates, to some extent, the supply-demand gap for these types of materials.


Q: How do you assess the viability of the project considering the different processes?

Lindholm: The different processes in the factory are analysed from a risk perspective and in terms of redundancy. In this context, redundancy means reducing production bottlenecks should one machine or parts of a process need to be shut down and where the factory could be faced with a risk of business interruption. As we usually insure the construction phase as well as the first year of operations, we need to assess the different risks that can be foreseen in the different phases of a project.


Q: What aspects do you consider when looking at the construction and operational phases?

Assandri Foldnes: We assess the construction phase as one of the greatest risks given that the company is usually not able to fulfil its obligations until the project is finished. In brief, it is important that the project is based on proven and scalable technology that relies on experienced and creditworthy sponsor(s). Furthermore, it requires a capable and experienced project team and a comprehensive engineering, procurement and construction contract with a reputable contractor and adequate liquidity buffers.

On the operational side, it is key to evaluate the economic profile of the plant, the overall production as well as the ability of the gigafactory to place its batteries in the market. On these points, it’s desirable to see the sponsor(s) participating as off-taker(s) since this creates a strong alignment of interest for the project to operate smoothly and cost-efficiently.

Lindholm: We adopt an almost cradle-to-grave approach, where we engage with our customers very early on in the process. This support can help decision-makers take the path towards a better and safer project design, which eventually leads to a better end-product. We provide risk engineering services throughout all the different phases of construction as well as when it goes into operations. As a lead insurer we are responsible for the customer servicing as well as informing the follow market about how the project runs and how the different risks are being managed. Additional services we can help our customers with include, for example a detailed natural catastrophe study to better understand flood risk potential and mitigation measures, or a dedicated climate risk solution, which is a growing need for both society and individual customers. With our risk insights and services, we can help minimise the risks and hopefully make the project a success.

Assandri Foldnes: We are committed to supporting our clients and the economy on its path towards decarbonisation. That’s why we stay on top of the latest market trends and provide innovative solutions to accelerate the development of EVs.