A recent report from the Swiss Re Institute shows that the data center industry is evolving into increasingly complex, high-energy-density facilities that concentrate risk within a single site, with underwriting success dependent not only on capacity but also on professional technical assessment and rigorous accumulation management.
Swiss Re highlighted that the data centers that power today’s AI infrastructure are growing rapidly in size and complexity, challenging the insurance industry’s ability to provide the coverage needed to finance.
Swiss Re pointed out in the report that the demand for data center insurance is rising, and it is expected that global insurance premiums related to data centers will increase from US$10.6 billion to US$24.2 billion by 2030. Re/insurance of a data center of this size is complex, both during construction and during the operational phase.
“While construction risk is primarily associated with creating assets (challenges include physical hazards, subcontractor interdependencies and delays), operational risk is associated with keeping high-value, multi-tenant critical systems continuously available. Once GPUs, tenants and services are in place, value and operational complexity increase, making business interruption (BI), rental losses and service disruptions critical. We are also seeing rising insurance values in catastrophic locations as an emerging risk driver,” said Swiss Re.
Water damage from cooling failures, electrical continuity holes, and new sources of ignition are other new factors creating data center risk.
For these large, complex facilities where value is highly concentrated, accumulation transparency is critical because insured portfolios may inadvertently create significant concentrations.
Swiss Re noted that large data centers are sometimes offered to risk takers through separate insurance plans (such as building, equipment and power plants), making capacity accumulation difficult to track. This can result in a single loss event impacting multiple insurance plans.
Large data centers also concentrate numerous tenants and insurance interests within a single physical footprint, often behind common critical systems such as power, cooling, and fire protection. This increases the likelihood that a single incident will give rise to multiple concurrent claims.
Swiss Re stresses that such facilities require complex, multi-layered protection strategies.
“Insurers have extensive experience with traditional data centers, but only a few large next-generation facilities are fully operational, leaving limited experience with lost experience. In this environment, underwriting success depends not only on capacity, but also on professional technology assessment and rigorous accumulation management,” the reinsurer concluded.
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