Key facts
- The data center insurance market is projected to reach $10 billion in premiums in 2026.
- Annual investment in data centers could exceed $300 billion by 2027.
- Some hyperscale data centers have insurable construction values between $10 billion and $30 billion.
- Insurers face risks including business interruption, power dependency, and operational disruptions.
- Capacity constraints and complex aggregation risks challenge the full insurance of hyperscale projects.
- Collaborative structures and alternative capital are emerging to meet demand and share risk.
Nonlife insurance companies are facing a burgeoning market in data center coverage, with projections indicating the sector could generate $10 billion in new premiums this year. This growth is fueled by substantial annual investments in data centers, which are expected to surpass $300 billion by 2027. However, the scale and complexity of these facilities present insurers with unprecedented risks. Some hyperscale data centers alone represent insurable values of $10 billion to $30 billion for construction. Beyond physical damage, insurers are also exposed to business interruption, power dependency, and operational disruptions. The sheer size of these projects often exceeds the capacity of individual insurers, leading to the development of collaborative structures where multiple reinsurers share the risk. S&P notes that insurers must maintain strong underwriting discipline due to limited historical loss data and the evolving nature of threats, including aggregation risks from supply chain disruptions, natural catastrophes, and cyber threats, compounded by the campus-style development and concentrated geographical footprints of data centers.