/ 9 min read
Engineering underwriting team - Global RE Underwriting
Key takeaways
- Single hyperscale campuses can carry insurable values of USD 20–30 billion, far beyond what large builds were worth two years ago.
- Many large projects are insured for a third to a half of their value, so the probable maximum loss estimate carries a lot of weight.
- Hail on inland sites, liquid cooling leaks, battery fires and power commissioning are the exposures we look at hardest.
The numbers got big very quickly
Two years ago a large data centre build might have been worth one or two billion dollars. Brokers now talk about single projects worth USD 5 to 25 billion, and S&P Global Ratings has put the insurable value of one hyperscale campus at up to USD 30 billion. That is the AI build-out showing up in the construction market.
Our view is that this is mostly an engineering story today and a property story tomorrow. Every campus finished this year becomes a very concentrated operational risk next year.
Not enough capacity to go round
Underwriters at Zurich have said publicly that there is not enough market capacity to insure the biggest campuses to full value, and Insurance Business reported that many projects are being insured for between a third and a half of what they are worth. Underwriting is moving from full value to probable maximum loss.
That puts a lot of weight on the PML number. If the loss estimate is too optimistic, the gap falls back on developers, their lenders and the captives that hyperscalers use to self-insure. Brokers have responded with big lifecycle facilities, but the capacity question is not going away soon.
Hail, heat and where these things get built
Data centres follow cheap land and available power, and that is pulling them inland. The Swiss Re Institute found that more than a quarter of US data centre capacity sits in areas with three or more large-hail days a year, and that most capacity now under construction is outside the traditional hubs. Zurich says severe weather has been the top cause of loss in its US builders risk book for three years in a row.
If that sounds familiar, it should. It is the same pattern we wrote about in secondary perils are now primary. A roof full of cooling plant and solar panels is a very expensive thing to put in the path of a hailstorm.
The risks that are new
Liquid cooling brings water into the white space for the first time at scale, so leak detection and isolation matter. Large battery installations bring lithium-ion fire risk, and fire separation between the batteries and the data halls is something we now ask about by default. Power is its own exposure too, especially where a campus depends on new grid connections or on-site generation that is still being commissioned.
There is also a lot of AI exposure on the liability side that does not live in the building at all, which is one more reason to think about the whole value chain and not just the bricks.
What we want to see
Good data makes these risks far easier to support. We ask for values by phase and by building, a clear PML methodology, hail and flood studies for the site, the commissioning plan for power and cooling, and the fire strategy for battery storage. Our checklist for engineering project data covers most of the rest.
Data centre construction is also picking up in the Gulf, alongside the GCC giga-projects we looked at earlier this year. If you are placing engineering or property capacity for a data centre programme, send us the submission and our engineering team will come back to you quickly.
Frequently asked questions
- Why is data centre insurance capacity so tight?
- Project values have grown faster than the market’s appetite. Single campuses can now be worth USD 20–30 billion, and insurers have said publicly that there is not enough capacity to cover the largest ones to full value, so many are insured on a probable maximum loss basis instead.
- What are the biggest risks during data centre construction?
- Severe weather, especially hail on inland sites, is the leading cause of builders risk loss. Commissioning of power and cooling plant, liquid cooling leaks and lithium-ion battery fires are the other major exposures.
- What should a data centre reinsurance submission include?
- Values by phase and by building, a clear PML methodology, hail and flood studies for the site, the commissioning plan for power and cooling, and the fire strategy for battery storage.
