Global data centre insurance premiums projected to be over US$24 billion by 2030

[SINGAPORE] The global data centre insurance market is projected to be worth more than US$24 billion by 2030, up from around US$11 billion today, even as insurance evolves alongside the data centre sector, a new report has found.

Rising capacity, insured values and operational complexity have made comprehensive insurance cover a prerequisite for the financing of many large-scale artificial intelligence infrastructure projects, business insurer Allianz Commercial noted in its report published on Wednesday (Aug 12).

Construction costs for a single AI campus can exceed US$20 billion, with insured values increasing substantially once high-performance computing equipment is installed.

“Demand is expected to extend beyond traditional property cover towards integrated solutions spanning construction, engineering, property, business interruption, cyber and liability, while creating new opportunities in areas such as energy resilience, operational continuity and technology risk,” Allianz Commercial said.

It noted that with data centres evolving from commercial real estate into mission-critical infrastructure, insurance is also expanding beyond protecting physical assets to supporting investment and operational resilience.

“While (insurance’s) primary role remains the transfer of financial risk, insurers are increasingly contributing engineering expertise, risk modelling and resilience planning throughout the project life cycle,” said Katharina Utermohl, head of thematic and policy research at Allianz Research.

Fire is cause of nearly 60% of claims

Fire was the most expensive cause of data centre losses, accounting for nearly 60 per cent of 677 million euros (US$781.6 million) in insurance industry claims. This was based on Allianz Commercial’s analysis of 221 data centre-related claims in the insurance industry.

Natural catastrophes ranked second in terms of claims value, followed by wilful acts including crimes and cybercrimes, and power failure.

By region, Europe accounted for 38 per cent of claims value, North America 36 per cent, and Asia 21 per cent.

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Water damage was the most frequent cause of data centre claims, followed by wilful acts, fire and equipment breakdown.

Europe accounted for 53 per cent of claim numbers, North America 36 per cent, and Asia 8 per cent.

According to Allianz, the US and China are expected to account for around 62 per cent of new global capacity additions until the end of 2030.

Business interruption, which is covered under property, was the primary severity driver by line of insurance business, highlighting the significant financial impact of operational downtime.

This is followed by construction and financial lines (including professional indemnity claims).

As data centres become critical infrastructure for the digital economy, their risk profile is changing rapidly as facilities become larger, more complex and increasingly interdependent.

Hyperscale and colocation of campuses can bring together multiple tenants, construction works, servers, supporting utilities and on-site infrastructure in one physical or operational space.

A single event can therefore trigger claims across property, construction, business interruption, liability, cyber and financial lines.

Real-life claims case studies showed that in hyperscale facilities, damage to external cooling systems, hot works-related fire damage, and a delay in start-up caused by power disturbances have resulted in losses ranging from US$50 million to US$100 million each.

“For insurers, the key question is not only the value of the building, but (also) the concentration of value and dependency inside and around it,” Christian Kolbe, global head of construction claims at Allianz Commercial, said.

“Power, cooling, batteries, fibre routes, testing and commissioning, and business continuity planning are all part of the same risk picture. Effective risk mitigation must begin early and continue throughout the data centre life cycle.”