Data Center Construction Drives Insurance Growth as Exposure Accumulation Rises

Data center construction is creating a large source of insurance premium, but the industry’s main challenge is keeping track of how much risk is concentrated in the same projects. Capacity is generally available for property and builders risk coverage; the harder task is managing overlapping exposures as campuses expand from construction into operation.

Large projects attract substantial capacity

Thousands of data centers are expected to be developed worldwide, with many individual projects valued at $3 billion to $5 billion, said Ryan Barber, New York-based global head of property at Aon. These projects are typically highly engineered, a feature that can make them attractive property risks to insurers.

Barber said insurers had placed limits as high as $8.5 billion more than a year before the Insurance Leadership Forum, held in early October in Colorado Springs. He said the market could likely place limits exceeding $10 billion now. Aon is also developing an operational property insurance facility for data centers.

Aon estimates the sector could produce more than $100 billion in new insurance premiums over the next five to 10 years, Barber said. That figure reflects a major growth opportunity, though the premium mix will change as facilities move from construction to operation.

Accumulation is the central underwriting concern

Large campuses are often built in phases. That can leave insurers covering builders risk at one part of a site while carrying operational property exposure at another. High-value computer equipment and dedicated power generation add further layers of exposure, potentially concentrating risk among insurers and reinsurers tied to the same development.

“The biggest struggle right now for insurers and reinsurers, for that matter, is to just track and understand the accumulation of risk that they’re taking on from these data centers,” Barber said.

Pat Donnelly, Chicago-based head of risk and broking for North America at Willis, said managing aggregation matters when choosing both sites and insurers. Some carriers are willing to cover multiple phases of a project; others prefer to insure separate segments. That difference can shape how a developer assembles coverage and how much exposure any one insurer retains.

Insurers also have to account for data centers alongside the property risks already on their books, said Marc Orloff, Boston-based president of global risk solutions North America at Liberty Mutual. “We all write a lot of property already … so it’s all about managing tolerances. How much of our exposure do we want? How much volatility do we want on our balance sheets?” he said.

Geographic concentration adds another consideration. Orloff pointed to clusters of expensive data centers in areas exposed to severe convective storms, where a single event could affect multiple insured locations. The issue is not simply whether the market can supply limits for a project; it is how those limits fit within insurers’ wider portfolios.

Coverage needs vary across lines

Property and business interruption capacity remains plentiful for most data center projects, said Marc Kunney, San Francisco-based chief client officer at EPIC Insurance Brokers & Consultants. Other lines can be more difficult to place. Professional liability is one example, with a more limited market, he said.

That uneven supply means broad statements about available insurance capacity can obscure the practical differences between coverage types. A project may be able to secure substantial property limits while facing a narrower set of options for professional liability or other specialized exposures.

Data center development has also prompted public opposition in some states, driven by concerns about electricity and water use and effects on local communities. Proposals to restrict or pause certain developments have emerged amid that debate. At the forum, executives generally viewed the sector as a significant source of insurance business, while recognizing that the growth comes with concentration and underwriting challenges.

Construction premium may not persist

The premium generated during construction won’t necessarily continue at the same level after a facility is completed. Builders risk coverage can produce substantial revenue while projects are being built, but that premium may fall if construction activity slows. Operational property coverage can continue once a facility is running, though Orloff said it may generate lower premium volumes.

“It’s not a recurring revenue stream,” Orloff said.

For insurers, the financial picture therefore has two timelines: a near-term pipeline of large construction projects and a longer-term book of operational risks. The transition could change premium volume and the type of exposure carried, even as the industry continues to serve a growing base of facilities.

The data center boom looks set to reward insurers able to assess exposure across construction, equipment, power and operations. The next measure of market strength will be how well carriers track those overlapping risks as projects are completed and the construction premium cycle matures.

AI exclusions meet resistance as insurers favor underwriting

Broad insurance exclusions for artificial intelligence risks have struggled to gain traction, as policyholders and brokers question how a technology embedded in ordinary business operations can be carved out of coverage. Several executives at the Insurance Leadership Forum said insurers are more often addressing AI exposure through underwriting decisions than blanket contract language.

“AI isn’t the risk per se. AI is an acceleration or augmentation of the delivery, and so it’s really hard to exclude AI,” said Kunney. Because organizations across industries use AI, he said, a broad exclusion could leave policyholders uncertain about what protection remains.

Some insurers have introduced affirmative AI coverage. Kunney cautioned that buyers should examine the wording closely: a policy may specify covered AI-related perils while leaving others outside the grant, effectively narrowing protection through the structure of the coverage.

Donnelly said he has not seen AI exclusions become common in insurance placements. “AI is too embedded,” he said, pointing to the difficulty of applying a broad restriction across business activities that already incorporate the technology.

Insurers weigh the form and the insured’s role

ISO, the insurance industry standards organization, filed optional general liability exclusions addressing generative AI exposures last year. Alex Wells, CEO of Zurich U.S., said the exclusions appear more likely to be used by smaller insurers that routinely adopt ISO forms.

Zurich has reviewed the endorsements but does not use blanket AI exclusions, Wells said. “We prefer to think about AI as an underwriting question rather than a contract question,” he said. He drew a distinction between companies using AI in their own operations and companies developing AI services and products, which can present different underwriting considerations.

Wells said coverage questions may change as case law develops around AI. For now, the reported market response suggests insurers are still assessing exposure company by company, rather than relying broadly on exclusions.

Competitive pressure shapes adoption

Shawn Ram, chief revenue officer at cyber insurer Coalition, said he has seen numerous AI exclusions filed but not widely adopted. Some brokers have told Coalition they would move business if insurers imposed them, he said. That potential loss of business may make carriers cautious about being first to apply a broad restriction.

Coalition has affirmative AI coverage in its policies. “In 2024, we announced that we are affirmatively covering AI exposures. We’ve only expanded that since then,” Ram said.

The current split is between insurers that define AI coverage through affirmative wording and those that assess how a company uses the technology during underwriting. As AI becomes more embedded in business operations, the wording of policies and the details of each insured’s activities are likely to remain central to how coverage is placed.