Allianz warns data centre boom reshapes insurer risk

Allianz Commercial has warned that the global data centre construction surge is reshaping risk for insurers, turning data centres into critical infrastructure.

Annual investment in data centres is projected to rise from about USD $500 billion in 2024 to more than USD $1 trillion as early as 2027, according to figures it cited. The build-out is being driven by artificial intelligence and is expanding beyond server buildings into electricity generation, grid links, cooling, networking and semiconductors.

The US and China are expected to account for about 62% of new global capacity additions through 2030. In Europe, Germany, the UK and Ireland remain large markets, while Spain, Finland and Denmark are expected to grow faster because of power availability and permitting conditions.

Across Asia Pacific excluding China, installed capacity is projected to increase from about 9GW to more than 28GW by 2030. Malaysia is expected to be one of the fastest-growing markets, with capacity forecast to rise more than tenfold.

Thomas Lillelund, Chief Executive Officer, Allianz Commercial, said the sector has moved beyond its earlier status as a specialist property class.

"AI is turning the latest generation of data centers from a specialist real estate asset into mission-critical infrastructure," Lillelund said.

"The scale of investment is extraordinary and, as these centers evolve beyond traditional data storage to high-performance compute demands, success will increasingly depend on resilience: access to power, reliable supply chains, robust construction controls, as well as climate-aware site selection and insurance programs that reflect the true accumulation risk. Indeed, comprehensive insurance cover has become a prerequisite for financing many large-scale AI infrastructure projects," he said.

Physical constraints

The main limits on expansion are increasingly physical rather than financial. Access to electricity, grid connections, permits, specialist equipment and skilled labour is becoming decisive for operators and developers.

In the US construction market alone, Allianz Commercial cited an estimated shortage of about 439,000 skilled workers, with a further 349,000 potentially needed in 2026. Those constraints are emerging as developers race to secure sites and bring new facilities online.

Climate exposure is also becoming a central issue. Around 79% of global data centre capacity is already located in areas with heightened natural catastrophe risk, while 54% is exposed to chronic heat and drought stress.

Some of the fastest-growing artificial intelligence infrastructure markets are also among the most exposed to climate threats, including Northern Virginia in the US, Johor in Malaysia and Marseille in France. The Americas have the highest exposure to acute flood, wildfire and wind risk, affecting 86% of capacity, while Asia Pacific has the highest exposure to chronic heat and drought stress at 89%.

Insurance growth

The data centre insurance market is expected to grow from around USD $11 billion to more than USD $24 billion by 2030. Allianz Commercial linked that growth to higher insured values, rapid capacity expansion and more complex operations.

Construction costs for a single artificial intelligence campus can exceed USD $20 billion before the full value of computing equipment is added. As facilities become larger and more interconnected, insurers are being asked to cover a broader mix of construction, engineering, property, business interruption, cyber and liability risks.

That broader exposure is changing how underwriters view data centre projects. Large hyperscale and colocation campuses can combine tenants, live operations, ongoing building work, utilities and digital infrastructure in one location, increasing the risk that a single incident triggers losses across several insurance lines.

Claims picture

Allianz Commercial's analysis of industry claims data shows fire is the biggest driver of severe losses in the sector. Fire accounted for well over 50% of about €700 million, or roughly USD $800 million, in losses reviewed by the insurer. Natural catastrophes ranked second, followed by wilful acts such as crime and cyber incidents, and then power failure.

By frequency, however, water damage was the most common cause of claims, ahead of wilful acts, fire and equipment breakdown. Business interruption was the main source of severity by line of insurance, underlining the cost of outages for operators and customers.

Recent losses show how expensive single incidents can become. Damage to external cooling systems, fire damage linked to hot works, and delays in start-up caused by power disturbances have each produced losses of USD $50 million to USD $100 million in hyperscale facilities.

Christian Kolbe, Global Head of Construction Claims, Allianz Commercial, said insurers now have to assess concentration risk as much as the value of the physical site.

"For insurers, the key question is not only the value of the building, but the concentration of value and dependency inside and around it. Power, cooling, batteries, fiber routes, testing and commissioning, and business continuity planning are all part of the same risk picture. Effective risk mitigation must begin early and continue throughout the data center lifecycle. Resilience must be designed in from the earliest planning stage," he said.