A new Howden report has highlighted the heavy financial toll of data centre outages, pointing to opportunities for innovative solutions, including parametric cover linked to service-level agreements and, where available, non-damage business interruption insurance.
As per Howden, half of facilities have reported an impactful incident over the past three years.
The firm explained that each outage costs an estimated $500,000–$1 million, implying global annual losses of approximately $2 billion.
Power and backup failures, primarily involving uninterruptible power supply (UPS) systems, reportedly account for most major outages, followed by cooling failures, network failures, and IT system failures.
Howden noted that this exposes a significant protection gap, as many outages involve no insured physical damage, meaning the resulting financial losses may fall outside traditional property and business interruption policies.
“This is creating opportunities for innovative solutions, including parametric cover linked to service-level agreements and, where available, non-damage business interruption insurance,” the firm added.
The new analysis also revealed how growing demand for AI infrastructure is exposing much older underinvestment in the grid networks required to move power to where surging demand sits.
“This is driving a capex boom in the utility sector and concurrently accelerating a shift towards alternative power sources for data centres, bringing new operational and financial risks,” Howden said.
The firm found that US data centre power demand has risen by 19% per year since 2000, while the US electricity grid has expanded capacity by just 2% per year over the same period.
As a result, data centres’ share of total US grid capacity has grown 50-fold, from 0.1% in 2000 to 5% in 2025.
Stuart Adam, Head of Natural Resources, Howden US, commented on the findings, “Power availability is becoming one of the defining challenges of the data centre boom. As demand for AI infrastructure accelerates, developers are increasingly looking beyond traditional grid connections to secure the electricity they need.
“While on-site generation can help accelerate development and improve energy security, it also introduces new operational and financial exposures. As operators take greater responsibility for power infrastructure, understanding and managing these risks from the outset will be critical to protecting investments and avoiding costly disruption.
“The insurance industry has an important role to play, bringing together expertise across energy, construction and property to help developers manage these exposures and build more resilient infrastructure.”
Deborah Duss, Global Head of Advisory & Client Solutions, Global Specialty, Howden, added, “The data centre boom is shining a spotlight on an infrastructure challenge that has been building for years.
“While generation projects often benefit from faster development including permitting, grid infrastructure faces more complex project scopes, lengthy permitting, and multiple stakeholder interests, making it harder to keep pace with growing electricity demand.
“For data centres, this makes location increasingly critical. A data centre, its power source and the grid infrastructure connecting the two cannot be considered in isolation. They are three interdependent parts of the same ecosystem and ultimately three key drivers of project success.
“Taking a holistic view from the outset allows risks to be identified and managed before significant capital is committed, rather than trying to solve them once an asset is operational. Bringing those three elements together from pre-CAPEX planning through construction and across the OPEX lifecycle creates a more robust foundation for resilience, insurability, and long-term performance.”
