“Existing Limits Can No Longer Cover the Risk”: Widening AI Data Center “Insurance Gap” Ignites Global Insurers’ Race for Market Dominance

Global insurers accelerate development of products targeting data center operators
Rapid expansion of data center market drives corresponding surge in risk exposure
Existing insurance frameworks leave clear coverage gaps, intensifying competition during market transition

The insurance industry is mobilizing to capture rising demand from the artificial intelligence (AI) data center market. As investment in data center infrastructure expands rapidly, insurers seeking an early lead have begun accelerating the development of underwriting guidelines and premium pricing models. With the asset values and potential losses associated with hyperscale data centers reaching levels that a single insurer can scarcely absorb, structures linking coverage from construction through operation and distributing risk among multiple insurers, reinsurers and capital market investors are proliferating rapidly.

Transformation of the Global Insurance Market

According to insurance industry sources on August 7, global insurance and reinsurance markets have recently been rapidly advancing their data center coverage structures. British global insurance broker Aon, for example, increased the coverage limit of its Data Center Lifecycle Program (DCLP), which spans the entire data center lifecycle, to $3.5 billion in April 2026. The company initially launched the program last year with a $1.5 billion limit, raised it to $2.5 billion in January and subsequently added another $1 billion. The limit applies to construction all-risk insurance, delay-in-startup losses, operational property damage and business interruption. Separate coverage reaches up to $400 million for cyber and technology errors and omissions liability and up to $500 million for project cargo and transportation.

US-based global insurance broker Marsh also increased the maximum coverage limit of its Nimbus program for large-scale data center construction projects to $2.7 billion. Its geographic reach has expanded from Europe to the United States, the United Kingdom, Canada, Europe, Australia and New Zealand. The program integrates coverage for physical damage during construction with losses arising from delayed completion and business interruption. British global insurance broker Willis is focusing on connecting coverage for transportation and equipment risks during construction with cyber, environmental and energy risks during operation. Hyperscale data center campuses comprise multiple buildings completed and commissioned at different times, creating potential coverage gaps during the transition from construction insurance to property and cyber insurance.

Data Center Demand in the Crosshairs

British insurance underwriting and solutions provider Advanced Technology Assurance (ATA) has launched its Global Data Center & AI Infrastructure Insurance program with the backing of a consortium comprising more than 10 insurers and reinsurers, including US insurer Arch Insurance, German reinsurer Munich Re, French reinsurer SCOR and syndicates operating in the Lloyd’s insurance market. The program’s central feature is the consolidation of multiple insurance lines—including property, computer hardware, cargo and transportation, cyber and technology errors and omissions (E&O), environmental liability and terrorism—under a single contract.

Efforts are also emerging to distribute data center outage risks through the capital markets. German reinsurer Hannover Re transferred part of its exposure to capital market investors this year through Cumulus Re, a $35 million catastrophe bond covering cloud service outage risk. Corporate losses from cloud outages are generally borne by insurers and reinsurers. A prolonged disruption of major cloud services such as Amazon Web Services (AWS) or Microsoft (MS) Azure, however, could trigger simultaneous claims and sharply increase reinsurers’ losses. Hannover Re raised capital from financial markets to protect itself against such large-scale correlated losses. Investors receive interest payments under normal conditions, while some or all of their principal is used to offset Hannover Re’s losses if disruptions exceeding predetermined thresholds occur in major cloud service regions.

Table 1. Data Center Coverage Programs in the Global Insurance Industry

Escalating Data Center Coverage Risks

The insurance industry’s response reflects the rapid growth of the global data center market. US management consultancy McKinsey & Company forecasts that global data center demand will nearly triple from current levels by 2030, with worldwide investment in data center construction potentially reaching $7 trillion by that year. Swiss global reinsurer Swiss Re also expects combined data center capital expenditure by the five largest technology companies—AWS, MS, Google, Meta and Apple—to exceed $600 billion this year. Of that total, an estimated $450 billion will be invested directly in physical infrastructure such as servers and graphics processing units (GPUs).

As the market expands, the risks assumed by insurers have grown increasingly complex. Data centers depend on tightly interconnected power, cooling, server and telecommunications infrastructure, meaning a single failure can inflict enormous property damage and cause extensive business interruption. Disruptions in the procurement of power transformers and high-performance cooling equipment can delay entire projects or prevent completed facilities from commencing operations, postponing investment recovery and creating stranded-asset risks. Liquid-cooling systems designed to manage the intense heat generated by AI servers and lithium-ion batteries installed inside racks also present significant hazards. Coolant leaks can be difficult to distinguish from losses covered under conventional water-damage policies, while overheated lithium-ion batteries can trigger thermal runaway and cascading fires. Cyberattacks can also disrupt power and cooling systems, causing physical damage and business interruption simultaneously. Recent military attacks targeting data centers in the Middle East have further elevated geopolitical risk as a material underwriting consideration.

Clear Limitations of Existing Insurance Frameworks

The insurance market’s current underwriting capacity cannot fully cover these risks. US global credit rating agency S&P Global estimates that insured values during the construction phase of hyperscale data centers range from $10 billion to $30 billion. That represents as much as three times the typical $5 billion to $10 billion insurance limit required for major infrastructure projects such as bridges and tunnels. S&P Global concluded that hyperscale data centers concentrating tens of billions of dollars in assets at a single location have already exceeded the coverage capacity of conventional construction and property insurance markets.

Clear constraints are emerging during the structuring of actual insurance contracts. According to Munich Re, hyperscale data center projects frequently rely on co-insurance arrangements in which multiple insurers each provide a portion of the total limit because a single insurer cannot assume the entire exposure. Even when insurance brokers assemble the maximum available underwriting capacity, they often fail to secure the coverage limits required by a project. Insurers also differ in the risks they are willing to underwrite and the policy terms they impose, while consolidating multiple carriers under a single contractual framework is inherently complex. As a result, the market also uses layering structures under which different insurers assume separate portions of losses at varying severity levels.

Impact on Project Execution

The shortage of coverage capacity is increasingly affecting data center financing. Zurich Insurance Group of Switzerland noted that “some lenders and investors require insurance covering the full construction cost of a data center or the facility’s full replacement value, but as individual project values rise into the tens of billions of dollars, the insurance market is finding it increasingly difficult to underwrite the entire amount.” Large technology companies can transfer selected risks to insurers while retaining the remainder on their balance sheets or through captive insurers. Infrastructure funds and private credit institutions, however, have limited capacity to bear such risks directly. Without sufficient insurance coverage, lenders are likely to hesitate over providing project financing.

The widening disconnect between industry growth and available insurance capacity has intensified the race for market leadership. “Data centers carry more complex risk structures than conventional commercial insurance, inevitably favoring insurers that accumulate underwriting experience, claims data and risk-assessment capabilities at an early stage,” an insurance industry official said. “Once a particular insurer repeatedly underwrites major projects and establishes a market track record, clients and insurance brokers begin to regard it as the preferred provider for data center insurance.” The official added, “With investment in AI infrastructure expected to remain robust for an extended period, insurers are competing to secure leadership in a market poised to grow to tens of billions of dollars, alongside capturing new premium revenue.”