A new AM Best report has suggested that the growing proliferation of data centre projects presents a “considerable opportunity” for the U.S. property & casualty (P&C) insurance industry to develop innovative new property and liability coverages amid increasing demand.
According to the report, data centre developers are “adamant” that the infrastructure must grow if the United States is to remain competitive in the global AI power.
“With AI becoming a more critical component for society in general, how well the headwinds associated with the availability and affordability of energy to power data centres are addressed will be of major importance,” AM Best explained.
David Blades, associate director, Industry Research and Analytics, AM Best, commented, “As data centre development and construction spreads, the required insurance coverage is evolving, as it is currently beyond what the traditional property/casualty industry has previously experienced.”
The rating agency’s report noted that “hyperscale” data centres are currently attracting the most attention and scrutiny due to their scale, rapid expansion, and significant effects on local communities.
AM Best said that much of the concern centres on power consumption, noting that by one estimate, a modern AI data centre can use as much electricity as around 100,000 homes.
With the rapid increase in both the number and size of AI data centres, P&C insurers are said to be facing the critical challenge of developing solutions to support these highly complex, high-value projects.
Similar dynamics were highlighted in a recent report from S&P Global on hyperscale data centre campuses, which found construction-phase total insured values reaching $20bn–$50bn as markets adjust to a step-change in asset scale, pointing to a growing but increasingly selective opportunity for re/insurers.
Turning back to AM Best’s report, the rating agency underlined that risks related to energy and water consumption, mineral requirements, investment in the electric grid, staffing and labour costs are also increasingly coming into play.
It also set out how corresponding risk factors may materialise with respect to coverage, including business interruption leading to loss of revenue due to a partial or total shutdown of the data centre from a covered cause of loss.
The report further outlined physical damage to data centres during construction (i.e. builders’ risk coverage), with potential extensions such as “delay in start-up” or “advance loss of profits” coverage, alongside protection for indirect financial losses caused by construction delays.
Additional risks included first-party financial loss arising from a covered cause of loss that damaged the physical structure and its interior components, including computer servers, equipment, and other contents.
Finally, the report pointed to potential insurer exposure on the asset side of balance sheets, given the significant capital required to finance data centres, including through private credit investments or other financing arrangements.
