Insuring the data centre supercycle
Six critical areas of interconnected risk, from construction to conflict
Our new data centre risk map highlights growing exposure to extreme weather, global conflict zones and liability risks
Artificial intelligence (AI) is driving one of the largest infrastructure investment cycles in modern history. Data centres are the physical foundation of that transformation. Insurance has a pivotal role to play, as it has in every previous cycle.
Existing research has largely focused either on the overall size of the insurance opportunity or on individual lines of business in isolation. Investors, developers, owners, operators and customers instead need a holistic understanding of the evolving data centre risk landscape and the insurance solutions available to address it.
This report seeks to answer three questions:
- What are the most important insurable risks facing data centres?
- What challenges do these risks present for the insurance market?
- Where are the greatest opportunities for risk transfer?
Principal findings
Drawing on Howden's proprietary analysis of the world's leading data centre database alongside an extensive review of publicly available information, the report provides a unique, data-driven assessment of one of the world's fastest-growing commercial risk classes.
Data centre risk is heterogeneous, interconnected and centred on downtime
Risk varies significantly according to location, size, age, design, power infrastructure, customer profile and operating model. Unlike many commercial assets, a single event can generate losses across multiple lifecycle stages, affect numerous stakeholders and trigger simultaneous property, liability, cyber and business interruption claims. Furthermore, exposure to business interruption is far higher than with most buildings because data centres generate high revenue by running high-density computing continuously.
The differentiated risk profile of data centres demands a highly specialised approach to insurance. This means combining pre-emptive risk management that delivers significant, ongoing risk reduction and operational savings combined with integrated, cross-peril insurance solutions that efficiently transfer the residual risks that can't be mitigated.
Six risk segments define the insurance landscape
- Construction
Unprecedented growth is creating major construction and delay risks. Between 2020 and 2025, around 58% of all data centre capacity built since 1990 was delivered, compressing more than half of the modern data centre industry's construction history into just six years. - Natural catastrophe
Data centres are exposed to a broad range of weather and nature-based risks. At the same time, natural catastrophe exposures are highly concentrated geographically, which underlines the need for portfolio diversification. Howden analysis finds that 32% of US operating data centre square footage has been affected by severe tornado or hail events over the past decade, with just 20 locations accounting for approximately 80% of affected floor space. - Power supply
Constrained electricity grids and the rapid deployment of behind-the-meter generation are creating new physical damage and business interruption exposures. By 2030, US data centres are expected to operate around 10GW of behind-the-meter generation, representing roughly one-quarter of sector power demand. - Outage
Low-frequency but high-severity failures have the potential to create significant operational and financial losses despite extensive redundancy. Power failures account for 45% of major outages (primarily UPS failures), followed by cooling (14%), networking (11%) and IT systems (9%). Only a small proportion result from insured physical damage, highlighting a substantial protection gap. - Cyber and conflict
Cyber attacks and physical threats are increasing alongside geopolitical instability. Retail colocation facilities account for 72% of multi-tenant data centres and 63% of interconnected facilities, increasing both attack surface and the potential for lateral movement. Meanwhile, data centre capacity located within 10–15km of conflict zones during 2025 alone equalled around 60% of that accumulated during 2020–24 and was four times the total for 2015-19. - Liability
Legal exposures are expanding through customer claims, environmental impacts and growing public scrutiny of data centre development. Although relatively few cases have resulted in insured liability losses, the number of major lawsuits and arbitrations involving data centres has more than tripled since 2021, coinciding with the acceleration of AI investment.
58%
of all data centre capacity built since 1990 was delivered between 2020-25, compressing more than half of the modern data centre industry's construction history into just six years
10GW
of behind-the-meter generation is projected to be used by US hyperscale data centres by 2030, representing roughly one-quarter of hyperscaler power demand
Selected highlights
1. In the US, extreme weather risk is concentrated in a surprisingly small number of locations
Howden’s analysis mapped the location of operational US data centres against severe tornado and hail events over the past decade to understand how much of the country’s data centre footprint has been exposed to extreme weather. It found that 68% of operating data centre space [by square footage] has avoided these events over the past decade, while 32% has been affected.
Despite the rapid build-out of new capacity, this picture isn’t expected to change significantly: when facilities expected to come online by 2030 are included, the affected share rises marginally to 33%. This is largely because new capacity is being added in multiple areas, not just those exposed to extreme weather.
However, the impact of extreme weather is not evenly spread. Of all the US towns and cities that are home to data centres, 155 have been hit by significant tornados or hailstorms in the last decade. Just 20 of these locations contribute 80% of the affected data centre building space. This is despite accounting for only 52% of the overall data centre building space across the 155 locations. Such a disparity reveals their higher exposure to extreme weather, rather than simply a greater area of data centres.
The findings highlight that extreme weather exposure is more geographically concentrated than might be expected. This, combined with extremely high asset values concentrated at individual locations, demands diversification of risk across portfolios and syndication of peak exposures across the insurance industry and capital markets.
2. Conflict increasingly intersects with critical digital infrastructure
Howden's research also highlights the growing exposure of data centre infrastructure to geopolitical instability. In 2025 alone, data centre space located within 10-15km of active conflict zones was equivalent to ~60% of the total recorded across the previous five years combined, highlighting how conflicts are increasingly encroaching on digital infrastructure.
Risks escalated further in 2026, when war in the Middle East led to the first known deliberate wartime targeting of commercial data centres, with up to five separate data centres in the UAE and Bahrain struck by Iranian drones to date.
For the insurance market, this convergence of physical and digital risk presents challenges around aggregation clauses and the boundaries between cyber, property and war cover. Addressing these exposures will require rigorous cyber-physical risk assessment and greater coordination of policy wordings across different classes of insurance. For example, physical damage to a data centre during a conflict could also trigger widespread digital outages and business interruption, requiring specialist coverage as the resulting losses are typically excluded under standard property and cyber insurance.
3. Liability risks rise alongside data centre development
Legal risks are also growing as data centres become larger, more energy intensive and more visible to the communities in which they operate. Major lawsuits and arbitrations involving data centres have more than tripled from four in 2021 to 14 in H126, coinciding with the acceleration of AI-driven investment in digital infrastructure.
Planning, zoning and environmental disputes are the principal drivers of recent litigation, particularly around hyperscale and AI campuses. Noise and nuisance complaints – including those concerning diesel generator emissions, water consumption and visual impact – have also become increasingly common. Together, these issues account for 78% of the growth in cases involving data centres over the past three years.
However, the liability landscape extends beyond opposition to new developments. Data centre owners and operators can face environmental liabilities associated with the historic use of sites, as well as new challenges created through the construction and operation periods, including those linked to excavation, fuel storage, generator use, chip cooling, as well as wastewater, noise, heat and air emissions.
For insurers, the conclusion is clear
The insurance opportunity will shift as the market matures. Construction and natural catastrophe dominate today's agenda because of the scale of current development. Over time, however, operational risks are likely to become increasingly important. The greatest long-term opportunities are expected to lie in power supply, combining entirely new insurable assets with insurers' deep expertise in the energy sector – and outage, where one of the industry's largest protection gaps creates significant scope for product innovation.
Data centres represent one of the largest and most complex risk management challenges of the coming decade. Achieving ambitious premium growth will require a broader value proposition than traditional property insurance alone. The greatest opportunity to close protection gaps lies in integrated risk management and transfer solutions throughout the asset lifecycle. Together, the six segments represent an opportunity of US$5 billion or ~60% of US annual operational premiums by 2030.
