A new report from S&P has suggested that rising demand for data centre insurance coverage could generate $10 billion in new premiums in 2026, highlighting the market’s growing significance and the scale of the opportunity for the global re/insurance industry.
The rating agency also indicated that annual investment in data centres could surpass $300 billion by 2027, underscoring the sector’s rapid expansion and the rising insurance requirements associated with large-scale infrastructure development.
For context, S&P noted that the largest infrastructure construction projects, such as bridges or tunnels, typically require insurance coverage limits of $5 billion–$10 billion.
By comparison, some hyperscale data centres are estimated to represent total insurable values of $10 billion–$30 billion for construction alone, demonstrating the scale of exposure associated with these facilities.
“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,” S&P added.
The rating agency also observed that insurers’ exposure to data centres may extend well beyond construction value. In addition to physical structures, assets such as IT equipment and related infrastructure can represent a substantial portion of total insurable value.
S&P continued, “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.”
Elsewhere in the report, S&P said capacity constraints will likely limit the industry’s ability to fully insure hyperscale data centre projects, given their scale and complexity.
The agency added that the market is increasingly relying on collaborative structures arranged by a particular insurer or insurance broker, in which multiple insurers and reinsurers partner to share risk.
According to S&P, these arrangements help bridge the gap between available capacity and growing demand, while also supporting more standardised and efficient insurance of complex risks involving multiple stakeholders.
“As the development of hyperscale data centres 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,” S&P added.
The firm’s report concluded, “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 centres and their concentrated geographical footprints. We expect that the most sophisticated insurers with the technical expertise, modelling capabilities, and balance sheet strength to offer large-scale insurance coverage will emerge as leaders in underwriting data centre risk. This is what we have seen with cyber insurance.”
