As hyperscale data centre campuses push construction-phase total insured values into the $20 billion–$50 billion range, markets are adjusting to a step-change in asset scale, with S&P highlighting a growing but increasingly selective opportunity for re/insurers.
A new report from the rating agency suggested that as capital spending on hyperscale data centre campuses expands per site, securing full insurance coverage may become increasingly difficult compared with traditional data centres.
“This insurance gap could increasingly function as a capital-structure constraint, where available coverage supports the portion of asset value lenders may view as recoverable in downside scenarios,” S&P explained.
This move beyond the historical capacity of traditional property and construction insurance markets to provide full replacement-style coverage at a single site means the constraints are concentrated primarily in physical construction and real asset development.
As a result, S&P has observed that insurance for data centres is increasingly structured through probable maximum loss (PML) or maximum foreseeable loss (MFL)-based and layered programs that may only cover part of the total project value, leaving a larger share of exposure outside the insurance coverage than has been typical for large-scale infrastructure.
The rating agency continued, “PML and MFL differ in the level of potential damage and the assumptions made during the assessment. PML assumes partial impairment of safety measures during a loss event, while MFL projects a more severe, worst-case scenario where all safeguards completely fail.
“Layered placement, consisting of multiple insurers across different layers or tiers, allows each insurer to attach at a specified loss level and exhaust at a defined limit. This structure enables access to higher overall coverage limits than any single insurer would typically provide alone.”
S&P’s new report on the matter also highlighted that aggregation risk has become a key constraint for insurers, with large campuses concentrating significant insured values at single sites and exposures accumulating across construction and operation phases.
“This is further complicated by multiphase development, as large data centre campuses are built in phases rather than all at once. Coverage must adapt dynamically as new buildings come online, requiring ‘stacked’ limits across construction phases and transitioning into operational property coverage,” S&P added.
While this evolving exposure profile challenges conventional underwriting frameworks, the rating agency stated that hyperscale data centres still represent a growing, but increasingly selective, opportunity for insurers and reinsurers.
S&P went on, “While overall insurance capital remains substantial, capital deployment insuring hyperscale campuses is becoming more selective, with greater emphasis on risk engineering, transparency of exposure, and portfolio-level accumulation controls, particularly as reinsurers face limited visibility across ceded portfolios.
“Tight underwriting with partial coverage, higher attachment points, and controlled exposure to business interruption and technology obsolescence can support predictable loss profiles, despite rising asset values and coverages.”
Looking forward, S&P said that from a credit perspective, where exposure is significant, disciplined participation may be neutral to positive, provided aggregation is carefully managed.
Key credit considerations reportedly include capital adequacy under severe loss scenarios, transparency of accumulation risk, and underwriting governance.
