Can insurers keep pace with the AI data centre boom?

Fire accounted for more than half of severe data centre losses analysed by Allianz.

Artificial intelligence (AI) data centres are creating more demand for commercial insurance as projects become bigger and more dependent on power, cooling, and digital networks, raising questions about how insurers will cover increasingly concentrated risks.

“We are seeing the digital economy become a real economy,” Gianfranco Lot, chief underwriting officer for property and casualty reinsurance at Swiss Re Ltd, said in a September report. “AI needs data centres, power grids, and increasingly complex infrastructure—and all of it needs insurance.”

AI data centres and renewable energy infrastructure could generate about $200b in commercial insurance premiums between 2026 and 2030, Swiss Re Institute said in the report.

The US and China are expected to account for about 62% of additional global data centre capacity through 2030, according to an Aug. 12 report by Allianz Commercial.

Data centre capacity in the Asia-Pacific region excluding China is projected to rise from about 9 gigawatts (GW) to more than 28 GW by 2030. Malaysia could post more than tenfold growth.

Annual data centre investment is expected to rise from about $500b in 2024 to more than $1t by 2027, Allianz Commercial said.

The global data centre insurance market could more than double to over $24b by 2030 from about $11b as operators seek protection against construction, equipment, business interruption, cyber, liability, and operating risks.

Allianz Commercial’s analysis of about $800m in data centre losses found that fire caused more than half of severe losses. Natural disasters ranked second, followed by crime and cyber incidents, and power failures.

Swiss Re warned that failures could affect several businesses because data centres depend on shared electricity, telecommunications, cooling systems, and digital networks.

High-voltage transformers can also take several years to replace, potentially extending construction delays and losses when businesses cannot operate.

Data centre operators will increasingly depend on reliable power, supply chains, construction controls, site selection that accounts for climate risks, and adequate insurance, Allianz Commercial CEO Thomas Lillelund said in the report.

Questions to ponder:

• Can insurers keep providing enough coverage as AI data centres become bigger and more expensive?
• How should insurers price risks when one power or network failure can affect several businesses?
• Could rapid data centre growth in markets such as Malaysia create risks faster than insurers can assess them?