Descartes Underwriting has announced the launch of a new parametric product suite for data centers, providing up to $140 million of flexible capacity per policy to respond to natural disasters that threaten the timely completion of construction, commissioning and ongoing service delivery.
The growing capacity needs of generative AI and other cloud computing services have led to a surge in data center investment, which is reported to reach $267 billion in 2025 and is expected to reach $700 billion by 2035.
Descartes, a provider of enterprise parametric insurance and reinsurance solutions for climate and emerging risks, said that with large multi-building data center sites hosting thousands of servers as well as critical power and cooling infrastructure, the insured value of each hyperscale campus could exceed a staggering $10 billion.
In addition, operators are now expanding with so-called edge facilities, which are smaller sites closer to end users to reduce latency, which Descartes said expands data center portfolios.
In response to the data center boom, Descartes has launched a flexible suite of parametric products designed to protect global data center lenders, investors and operators from severe, low-frequency natural disaster losses during the construction or operations phase.
For projects and operational data centers in the United States, each earthquake and hurricane risk policy has a capacity of up to $140 million.
Descartes highlighted some of the benefits of data center parametric insurance, noting that such coverage can increase limits, fill monetary and time deductibles, and provide flexibility to cover business interruption and non-damaging business interruption, including behind-the-meter power plants. Additionally, parametric payments provide immediate liquidity for delays associated with start-up delays, covering financial losses caused by construction delays and supply chain disruptions. Parametric solutions can also provide rapid liquidity to support operators and lenders when service level agreements are breached.
“Data centers are at the heart of the modern digital economy, and they require equally modern risk transfer solutions. Our new suite of parametric insurance products for U.S. data centers offers reliable, customized coverage that is triggered when data center construction is delayed by a natural disaster, even if there is no damage. This is a solution for our times,” said Daniel Vetter, Head of Descartes Americas.
Sebastien Piguet, chief insurance officer at Descartes, commented: “Descartes takes a highly scientific approach to underwriting peak risks. We work with numerous data centers and their brokers around the world to assess the impact that various types of natural disasters may have on operating data centers as well as data centers under development, providing extended insurance to owners, operators, investors and tenants to ensure that such events do not cause ongoing financial losses.”
As an example of how parametric insurance is relevant to data centers, Descartes highlighted how a flooding event forced a data center located in northern Virginia, US, to shut down its cooling and power distribution systems. This will result in minimal physical damage but come with high business disruption costs, including potential service level agreement penalties for multiple tenants.
“With Descartes’ parametric live flood product, such events can trigger payments almost immediately, based on the recorded live flood depth,” the company said.
The company’s parametric insurance products provide coverage for property damage and non-damaging financial losses caused by up to 20 perils, including severe convective storms (tornadoes), floods, hurricanes, earthquakes, extreme heat and deep freezes.
