Lockton warns of rising fire risks from battery returns

Lockton is advising New Zealand-based commercial property owners and retailers to adopt comprehensive fire risk controls as the volume of returned lithium-ion batteries continues to rise.

With increasing use of these batteries across consumer electronics and electric vehicles, the potential for fire incidents linked to storage and charging has become a growing concern for insurers and brokers.

The consultancy’s warning follows a fire at a recycling plant on Auckland’s North Shore in May, which reignited discussion about the absence of a national regulatory framework for managing end-of-life batteries.

Lockton has pointed to thermal runaway as a key hazard – when battery cells overheat uncontrollably, leading to fires or explosions that are difficult to contain.

Understanding thermal runaway and operational vulnerabilities

Lithium-ion batteries are widely used because of their energy density, but when damaged, overcharged, or exposed to high temperatures, they can enter thermal runaway. This process releases significant heat and gases and may spread quickly to surrounding materials, particularly in storage areas containing flammable goods.

Returned batteries often arrive with residual charge or signs of wear, increasing the likelihood of thermal incidents.

According to Lockton, battery fires can escalate rapidly and challenge conventional fire suppression systems, complicating evacuation procedures and emergency response.

Mitigating fire risk in battery storage and returns

Lockton’s risk engineering guidance outlines multiple areas of control for businesses managing battery returns:

• Risk assessments: Businesses should update fire risk assessments to account for battery hazards, ensuring compliance with New Zealand’s workplace safety laws.
• Battery management systems: Companies handling returns should implement structured procedures for the inspection, segregation, and handling of battery units, with staff training and clear emergency protocols in place.
• Storage infrastructure: Damaged or returned batteries should be kept away from core buildings in fire-resistant, non-combustible enclosures. If storage indoors is unavoidable, fire-rated compartments with temperature control and fire doors are recommended.
• Charging controls: Charging should not take place if a battery is visibly damaged. When charging is required, it should be performed in dedicated, monitored areas designed to reduce ignition risk.
• Daily monitoring: Facilities should conduct regular inspections using thermal cameras when necessary. Suspect batteries should be moved to designated outdoor safe zones.
• Emergency planning: Businesses should ensure appropriate fire detection systems are installed and maintained. Lockton recommends aligning detection levels with international standards and coordinating response planning with local fire services.

Insurance sector contends with regulatory gaps and inconsistent practices

While international standards exist, New Zealand has yet to establish national protocols for the safe repurposing or disposal of lithium batteries.

The Imported Motor Vehicle Industry Association (VIA) has raised concerns about fragmented practices in the repurposing of EV batteries and the insurance challenges these present.

“We’re putting lithium batteries into the community at scale, but we don’t have a clear plan for what happens when they reach the end of their life,” said VIA chief executive Greig Epps.

Technical lead Malcolm Yorston noted that many operators rely on overseas guidelines, which are not always applicable to local conditions and lack legal standing in New Zealand.

Insurers are already responding. Some have narrowed policy coverage for reused battery installations in residential and commercial settings, citing challenges in verifying safety standards, traceability, and maintenance histories.

Data shows growing exposure across insurance classes

According to data from AMI Insurance released in March, fire claims related to lithium batteries rose by 17% in 2025. The claims were spread across motor (27%), contents (25%), home (23%), and commercial lines (23%). More than half of the reported fires involved batteries not in use at the time of the incident.

This trend has prompted insurers to reassess underwriting criteria and risk engineering requirements when assessing facilities where battery storage or returns are involved.