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Capacity limits for data center coverage could boost ILS and captives

S&P estimates insurers may need coverage limits of $5 billion to $10 billion for major infrastructure projects, while hyperscale data centers can reach $10 billion to $30 billion in construction insurable value.

Reported · Written up by our desk · Industry & Deals

S&P Global says rising demand for insurance coverage for hyperscale data centers could generate $10 billion in new premiums in 2026, as the re/insurance industry faces growing exposure tied to the sector’s rapid expansion.

The rating agency also projects annual investment in data centers could surpass $300 billion by 2027, underscoring how larger projects may drive higher insurance requirements for both physical assets and associated risks.

S&P noted that major infrastructure projects typically require insurance capacity in the $5 billion to $10 billion range, while some hyperscale data centers are estimated to represent total insurable values of $10 billion to $30 billion for construction alone.

S&P added that coverage may extend beyond buildings to IT equipment and operational risks such as business interruption from system downtime and power dependency. It expects capacity constraints to limit what insurers can fully underwrite once total insurable values reach $20 billion to $30 billion per location, which could push more self-insurance through captive insurers and potentially increased use of insurance-linked securities (ILS).

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