Enterprise Play

Barely an hour passes without news on the colossal economic and social impacts— both positive and negative—of building an estimated 8,400 next-generation data centers by 2030 to power complex artificial intelligence models.

Nearly $7 trillion is earmarked by that year to create a global data center ecosystem at massive scale and power-hungry capacity, according to a McKinsey analysis. That would represent roughly a quarter of U.S. gross domestic product in 2024.

Take, for instance, the world’s largest operational data center campus by area: China Telecom’s Inner Mongolia Information Park, 42 separate structures covering 10.7 million square feet. To put that in perspective, 175 football fields, give or take a few yards, could fit inside the structures’ walls. The world’s most energy-intensive data center campus is expected to be the Fir Hills/Stock Farm Road project in South Korea. When complete, the facility is designed to have a power-receiving capacity of 3 gigawatts (GW). Just one GW can power 350,000 to 750,000 homes, depending on regional energy usage and efficiency.

In the United States, the most significant data center initiative is OpenAI’s ambitious Stargate complex, spanning six separate sites globally and backed by several partners led by funder SoftBank. Stargate’s initial buildings in Abilene, Texas, are operational, with the full 1.2 GW campus expected to be completed by mid-2026. This site, however, is merely the first step toward a gargantuan 10-GW compute capacity goal, putting rival projects to shame.

Aside from these large hyperscale data centers— designed to handle huge amounts of computing power for cloud providers like Amazon Web Services (AWS), Microsoft Azure, and Google Cloud Platform—thousands of smaller “edge” data centers spanning a few hundred square feet are being built worldwide. The facilities are situated at the edge of a network, typically in urban areas or on the premises of large factories and hospitals, rather than encompassing a single massive, remote location. Construction also has begun on approximately 350 to 400 larger colocation data centers, typically covering 500 to 10,000 square feet, that rent space to businesses and other organizations that benefit from existing infrastructure to house their servers and networking equipment. An unknown number of privately owned, 5,000 to 100,000 square foot enterprise data centers are also being built for internal uses by various individual organizations.

A 2025 report by Dodge Construction states that construction spending on data centers has grown by double digits each month year over year since November 2021.

These facilities present a significant new business opportunity for the insurance industry, but one that demands creative solutions to insure the risks that come with building and running a data center. Unique land and power requirements, cyber risk, and the sheer size of the investment require cross-functional teams of brokers to serve data center clients.

Massive Insurable Value

As the data center boom reverberates through the economy, the insurance industry plays a vital role— underwriting the physical infrastructure and complex technology to mitigate the potential for catastrophic financial losses. Based on recent industry analyses, the total insurable value of global data center infrastructure by 2030 is estimated to be nearly equivalent to the roughly $7 trillion in projected capital expenditure.

More than $4 trillion of this sum is expected to fund computing hardware, such as servers, storage, and networking, while the remainder covers physical real estate, power, and cooling infrastructure. A November 2025 report by Allianz Commercial notes that project costs have escalated dramatically, with some like Stargate exceeding $20 billion. Even average-sized facilities cost between $500 million and $2 billion.

This concentration of value, coupled with high power density and complex technology, requires specialized coverage for risks such as natural disasters and system failures. Moreover, the extreme concentration of critical computing infrastructure within enormous, power-hungry data centers is a widespread disaster in wait.

“Data centers are more than just buildings in places like Ohio or South Africa; they’re supporting a global business ecosystem,” explains George Haitsch, Technology, Media, and Telecommunications Industry Division leader at insurance brokerage WTW. “The tech solutions and information delivered are crucial to customers like hospitals, government entities, power plants, energy providers, and financial services companies. The failure of a single hub could have widespread, cascading impacts.”

Such possibilities are not theoretical. Both AWS and Microsoft Azure experienced significant outages at their data centers in late 2025, impacting a wide range of global services.

The October AWS outage in its US-EAST-1 region was caused by an internal technical malfunction. Cyber analytics firm CyberCube estimated preliminary insured losses ranging from $38 million to $581 million.

Azure endured two separate incidents: an October configuration error in its traffic-routing service and a November thermal event in its West Europe data center caused by a cooling failure. Thousands of customers experienced disruptions, from email inaccessibility to service failures, resulting in economic losses of between $4.8 billion and $16 billion, according to Breached Company, a cybersecurity analysis blog.

The data center boom is already driving an enormous amount of business into the insurance industry. “I’m spending half of every day working with a core group of people on our data center business, which is off the charts,” says Tom Quigley, Communications, Media, and Technology Practice leader at Marsh, which has reorganized to offer comprehensive services to the data center ecosystem.

“Everyone is involved, due to all the risk interconnections and dependencies. We need to address all of those risk interconnections, which means…we’re looking at the full life cycle. There is different stuff to look at, such as the land, the power, the partners, the due diligence, site selection, the operational risks, the SLAs [service level agreements], and where we can insure them,” Quigley says. “This is all about business continuity and resiliency.”

Brokers are capitalizing on the market opportunity by forming dedicated units to provide the essential, specialized services and risk mitigation tools necessary for data center developers to operate in a complex environment. The technical complexity and unique risk profile of modern data centers require specialized expertise that a generic insurance team may not possess.

“We’ve refined our strategy around data centers to focus on that evolving sector in the context of the digital infrastructure,” Haitsch says. “When ChatGPT was introduced and that whole chapter opened with AI…going to the forefront of the global consciousness, we created a partnership between the teams in our technology and construction practices [to serve the industry].”

As the vast power requirements of the data center ecosystem strained global energy infrastructure, necessitating creative new power-sourcing approaches, WTW expanded its partnership to help clients manage significant operational risks, such as power outages and disruptions. “We now have a digital infrastructure steering committee within WTW, ensuring we provide comprehensive expertise and solutions tailored to all of a data center client’s key risks,” Haitsch says.

He cited a recent insurance program developed for a hyperscale data center campus that covers all property, casualty, professional liability, and environmental risk exposures during construction, then seamlessly transitions to relevant coverage during operations. The insurance program also factors in the marine stock throughput risks of expensive incoming hardware equipment and the advanced energy risks involved in both primary and secondary power requirements.

Aon also brought together experts from across its enterprise to serve the data center ecosystem, via the Data Center Lifecycle Insurance Program. Announced in July 2025, the multiline insurance facility is designed to help clients manage risk at every stage of data center development and operations. The new facility “empowers clients to make better decisions, moving faster and more confidently, with protection that evolves alongside strategic assets, from physical infrastructure to digital operations,” says James MacNeal, global industry specialty leader of construction and infrastructure for Aon.

Testing Insurance Capacity

As the pace of data center development quickens, WTW, Marsh, Aon, Gallagher, and other insurance brokerages are assembling complex insurance products and specialized risk mitigation strategies to allay losses during construction and operations. But is the value concentrated in these projects beginning to strain the capacity of the global insurance and reinsurance markets?

Presently, the property and casualty insurance sector has robust capital positions, with industry surplus surpassing $1 trillion and reinsurance capital exceeding $725 billion in 2024. The recent Azure and AWS outages, for instance, were estimated to have a low-to-mid single-digit impact on insurers’ loss ratios, well within the industry’s capacity.

Nevertheless, a data center representing investments of up to $20 billion can exceed the capacity that a single insurance company is willing to deploy. Generally, an insurer’s capacity for one large data center project maxes out at about $250 million, meaning complex placements involving multiple insurers are required to cover the total value. Brokers are finding it difficult to assemble sufficient capacity.

“Every insurer and reinsurer this year has wrapped their heads around how to find more capacity to deploy because the traditional capacity available to us through our treaties and net retentions is simply not enough,” says Darren Tasker, head of construction Americas at Allianz Commercial. “Brokers are trying to bring the whole global market together to assemble the necessary capacity to cover these facilities, which are in the tens of billions of dollars.”

Demand for risk-bearing capacity for data centers is likely to continue to outstrip the available supply in the near term. “Assembling the necessary insurance capacity for every line of business associated with data centers is significantly straining the capacity the insurance industry offers today,” says Dave Nicholson, global client leader for reinsurance solutions at Aon. “Even large hyperscalers, which are well capitalized and have deep pockets, are trying to get as much capacity as possible to protect the sheer value and exposure they have to financial loss.”

Coverage Beyond The Basics

Data centers’ coverage needs are vast, and they range from those seen in a typical construction project to those that are unique to data centers.

Construction is a major factor in the capacity struggle, due to data centers’ unique land and power needs, their concentrated values, and their extreme technical complexity.

Location fundamentally determines exposure to environmental threats, infrastructure reliability, and potential regulatory hurdles, says Marsh’s Quigley. Choosing a site with a low natural disaster risk and robust power and water access also helps mitigate construction and operational challenges, ensuring continuous uptime and protecting capital investments.

Brian Cooper, U.S. National Construction Practice leader at Gallagher, says a vital decision in selecting a data center site is whether to secure power from utility companies or create an independent, off-grid, and often on-site power base. For example, at a data center in San Jose, California, Equinix generates its own power using fuel cells that convert natural gas into electricity, supplemented by solar panels.

“Creating your own power base and grid is one of the most important things that has to be figured out in the process of constructing a data center; not all of them are in an ideal physical location with plenty of power to tap into,” says Cooper. “In some rural areas and other communities, residents don’t want a data center tapping into the public utilities.…Power has to be figured out and [be a] part of the overall thought processes of data centers before sticking a shovel in the ground.”

Once a data center is operational, land rights remain a critical risk. Losses emanate from defects in the title or ownership of the acquired land. For example, if a title search fails to uncover a preexisting easement that conflicts with critical cooling or power lines, the facility may be forced to halt operations or undergo expensive rerouting to avoid encroaching on a third party’s land rights.

“We’re getting requests from data centers for title insurance in the marketplace of a billion dollars, far greater than the typical title insurance policy,” Nicholson says. “The magnitude of coverage requested is stretching the limits of the industry to offer the capacity.”

Environmental liabilities are another land issue. The massive quantities of water and power that data centers consume draw scrutiny in drought-prone regions. The facilities emit harmful pollutants from backup diesel generators and risk contaminating local water supplies with cooling chemicals. Constant noise and industrial lighting also create significant sensory pollution, triggering community complaints and legal challenges regarding public health and wildlife. Since standard general liability policies exclude pollution, brokers insure these risks via environmental or site impairment liability policies.

Aside from the land issues, building one of these facilities involves intricate mechanical and electrical systems that use specialized, long-lead-time equipment. Builders rely on a small, highly specialized group of global fabricators sourced via global supply chains, making projects susceptible to delays and vulnerabilities caused by geopolitical and supplier financial instability.

The modular construction employed for these operations, which involves building standardized, prefabricated parts in advance at a factory and then shipping the components to the building site for assembly and installation, can add to the risks.

Complex logistics for oversized transport and damage mitigation in transit pose unique challenges. Off-site manufacturing limits project manager oversight, potentially creating communication gaps and quality control issues. By the time a defect or delay at the factory is communicated, it can be too late to prevent a project setback, resulting in additional costly delays in final assembly and commissioning.

Even with the potential for delays, modular construction can reduce the time needed for a facility to begin operations from over a year to months or even weeks, says Peter Hanbury, senior partner and head of data center infrastructure at management consultant Bain. “This is evident in satellite photos of the Stargate flagship campus in Abilene, Texas. Six or seven modules, each a stand-alone data center unit, are built together to function as one giant cluster,” he says.

Modular construction also presents a natural form of risk management, isolating a fire or outage in one building to prevent total operational interruption across a data center campus. Brokers then can develop different coverage building by building, based on their specific needs, diluting the risk via a number of insurance and reinsurance markets, Hanbury explains.

Supply chain vulnerabilities are eased through contingent business interruption and political risk insurance policies, covering losses from financially unstable or geopolitically impacted global fabricators. Complex logistics are managed by ensuring appropriate transport and storage coverage for oversized components. To combat quality control issues and project delays caused by off-site manufacturing, brokers can secure specific insurance products, including builder’s risk, delay in startup (DSU), and product liability coverage.

“DSU is the financial lifeline for a construction project,” Tasker says. “Attached to a builder’s risk policy, it indemnifies against lost income from project delays, but only when physical damage from an insured peril—be it fire, natural catastrophe, or even human error—triggers the loss.”

Once a data center is fully operational, insurance brokers can assemble comprehensive coverage packages tailored to the facility’s ongoing needs.

Due to the massive amount of cyber risk, the importance of comprehensive coverage cannot be overstated. In addition to traditional cyber coverage, two important policies—cyber liability and technology errors and omissions—can be combined to insure the financial fallout from data breaches, network security failures, service interruptions, and claims related to professional services provided.

Alternative risk transfers solutions are also being utilized for events such as a breach in a data center’s SLA. For example, Lockton, in partnership with Parametrix, underwrites a parametric solution that mirrors the SLA contracts a data center has inked with clients like technology companies. If an SLA uptime requirement—for example, 99.5%—is breached, the policy triggers and immediately pays out the credit amount specified in the SLA contract.

Offsetting Performance Risks

While traditional insurance policies form the foundation for managing data center risks, they often fall short of providing complete coverage due to the concentration of asset values, the critical reliance on continuous power and cooling, and the complex nature of data.

Since massive investments in data centers cannot be funded by cash flow alone, developers increasingly rely on debt financing, including corporate debt, private credit, and asset-based securities. “As more hyperscale campuses move from the conceptual stage into development, we’ve observed a distinct trend in debt financing, unique financing models, and ownership structures,” says Aon’s Nicholson.

To offset associated risks, brokers assemble specialized surety and credit insurance solutions. Credit insurance mitigates the performance guarantee risks within the power purchase agreements between data centers and utilities or other energy generators. Transferring payment risk, from the potentially lower-rated data center to a highly rated insurer, significantly improves the project’s overall financial viability. This enhanced security reduces the risk for lenders, which frequently results in lower borrowing costs and improved loan terms for the energy generator or utility. Quigley notes that Marsh has assisted data center developers like Meta in using credit insurance for such performance guarantees.

Brokers can also arrange for a surety bond when a utility company wants to ensure that the developer finishes necessary grid upgrades, such as substations and transformers, for the facility. The bond guarantees that the infrastructure work will be completed; if the developer defaults, the surety bond covers the costs and protects the power provider from financial loss.

“Whether it’s power purchase agreements with a new renewable energy company—planning on them giving me power for 10 years and needing a guarantee that I will get it—or a surety bond to buy this stuff in five years, these financial guarantees are crucial,” Quigley says.

Ultimately, the critical interdependence between data center developers and the insurance industry will be vital in the next five years as the data center boom resounds. Specialized risk mitigation strategies and innovative insurance products are the linchpin of the AI era’s continued success.

“The importance of the insurance industry to the data center boom is immeasurable,” says Ed Chanda, global leader of insurance audit at accounting and advisory firm KPMG. “Insurance allows businesses like data centers to take innovative and extreme risks, knowing they have protection if they fail. Fortunately, the industry has tackled large severe risks before, slicing and dicing them up so no one insurance company is on the hook.”