Data Centers Offer A Hyperscale Pool Of Insurable Risks
Annual investment in data centers could surpass $300 billion by 2027. The increasing demand for large, specialized, power-intensive campuses is creating a meaningful growth opportunity for the global re/insurance industry.
We expect capacity constraints to limit the industry’s ability to fully insure these hyperscale data center projects, as total insurable values reach $20 billion-$30 billion per location.
How re/insurers manage concentration and aggregation risk due to the colocation of high-value assets and the interconnectedness of risks through the presence of multiple stakeholders will be a key consideration in our credit rating analysis.
Data centers are not new, but today’s hyperscale campuses dwarf their traditional counterparts. The largest infrastructure construction projects, such as bridges or tunnels, can require large insurance coverage limits of $5 billion-$10 billion. In contrast, S&P Global Ratings expects some hyperscale data centers to represent total insurable values of $10 billion-$30 billion for the construction alone. These projects involve a complex ecosystem of hyperscalers, developers and builders, utility providers, equity investors, and increasingly, public and private lenders, each with their own insurance requirements. This represents a huge growth opportunity for the commercial and specialist re/insurers that participate in these projects.
Rising demand for data center insurance coverage could generate $10 billion in new premiums in 2026. To put this into perspective, we estimate that the global aviation insurance market has annual premiums of around $5 billion. This highlights just how significant the data center market could become and the scale of the opportunity for the global re/insurance industry. The sheer magnitude of data center assets supports this growth potential. Based on the roughly 11,000 data centers that are in operation globally, we estimate a total insurable asset base of over $2 trillion. We expect the insurable asset base to grow rapidly, with annual investment potentially exceeding $300 billion by 2027.
Insurers' exposure may extend beyond the construction value. Other physical assets like IT equipment and related infrastructure may represent a material insurable value. Insurers may also cover many other risks beyond those involving the physical assets. Risks such as business interruption--due to system downtime, power dependency, and operational disruption--can be equally, if not more, material than the risks involving the physical assets, further expanding insurers' opportunities and challenges.
While business interruption is relatively straightforward to insure for property developers, it is more complex and difficult to insure for data centers. This is especially the case for hyperscalers, as downtime is linked to computing capacity, power utilization, and interconnectedness with other data centers. Hence, we believe that hyperscalers will continue to cover a significant share of their exposure through their own captive insurers.
We expect specialized insurers and reinsurers to increase their capacity to meet the demand from hyperscale projects. Historically, relatively modest per-risk limits have constrained the protection that a single insurer can offer against large-scale infrastructure risks. However, insurers have begun to expand their capacity to cover such risks in response to the rapid development of hyperscale data centers. We understand that some large commercial insurers now offer per-risk limits in the low single-digit billions for data center exposures, reflecting both rising demand and the increasing scale of these assets.
Even so, no single insurer can absorb the risks alone. As a result, the market increasingly relies on collaborative structures arranged by a particular insurer or insurance broker, whereby multiple insurers and reinsurers partner to share risk. Such solutions not only help bridge the gap between available capacity and growing demand, but also make the insurance of complex risks with multiple stakeholders more standardized and efficient. As the development of hyperscale data centers accelerates, we expect these collaborative structures to play an increasingly central role in scaling up the insurance market’s response. Furthermore, we expect alternative capital to start providing capacity as the market develops.
We expect re/insurers to adapt their products to the increase in demand and complexity. The scope of insurance evolves throughout a project's lifecycle, with coverage differing depending on whether the project is under construction or in operation. Typically, the largest sums that insurers offer cover property risk. This encompasses construction-related risks and delays and property damage and business interruption once the project is operational. Project cargo insurance covers the transportation of equipment. On the casualty side, insurers can cover third-party liabilities, workers' compensation, professional indemnity for error or negligence, and environmental liabilities. Technology and cyber-related policies will also need to adapt as new risks emerge.
We expect cautious expansion in the data center space as the risks become more complex. We expect insurers to maintain strong underwriting discipline as they assess increasingly large and complex risks, particularly in light of limited historical loss data and the evolving nature of the risks. Compared to traditional infrastructure, hyperscale projects introduce additional complexity through their rapid construction timelines; large asset values, especially for technology equipment; and multiple sources of aggregation risk, given the potential number of stakeholders involved per site. Sources of aggregation risk include supply chain disruption, natural catastrophes, and cyber threats.
Further compounding these risks are the campus-style nature of the data centers and their concentrated geographical footprints. We expect that the most sophisticated insurers with the technical expertise, modeling capabilities, and balance sheet strength to offer large-scale insurance coverage will emerge as leaders in underwriting data center risk. This is what we have seen with cyber insurance.
We believe that the insurance protection gap will persist due to capacity constraints. We expect capacity constraints to limit the insurance industry’s ability to fully insure hyperscale data center projects as total insurable values reach $20 billion-$30 billion per location. As a result, some material risks--especially those that arise during the operational phase, such as business interruption and technology-related losses involving IT equipment, for example--will likely remain self-insured or only partially insured. This will drive greater use of self-insurance through captive insurers, and potentially, alternative capital such as insurance-linked securities.
This situation also underpins the economic implications of data center expansion. As digital infrastructure assets are vital to AI, cloud computing, and enterprise operations, the insurability of these assets directly affects capital formation--the net increase in a country's stock of physical capital goods--as well as financing costs and project viability. At the same time, we project that data centers will account for about 14% of U.S. power demand by 2030, up from 5% in 2025. The buildout will therefore drive investments across energy, utilities, and infrastructure, amplifying data centers' role as a key driver of economic growth.
We will monitor how re/insurers adapt to the growing scale and complexity of data center risks. We believe that re/insurers started the year in a position of strength, and we do not expect any rating impact in the near term, as the size and limits of participating carriers' retained lines remain relatively modest. Nevertheless, increasing insurance coverage limits and underlying exposures warrant close attention. Key areas of focus include underwriting expertise, the evolution of policy wording, the scope of business interruption coverage, long-term reserving challenges, insurance claim response times, and reinsurance structures.
In particular, how re/insurers manage concentration and aggregation risk due to the concentration of high-value assets in single locations and the interconnectedness of risks through the presence of multiple stakeholders will be critical. How effectively re/insurers balance growth opportunities with disciplined risk selection and capital management will also remain a key consideration in our credit rating analysis.
Charles-Marie DelpuechLondon+44-20-7176-7967charles-marie.delpuech@spglobal.com
Patricia A KwanNew York+1-212-438-6256patricia.kwan@spglobal.com
Maren Josefs London+44-20-7176-7050maren.josefs@spglobal.comSimon AshworthLondon+44-20-7176-7243simon.ashworth@spglobal.com
Neil R SteinNew York+1-212-438-5906neil.stein@spglobal.com