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Data centers risk being over-insured as demand outpaces modeling
Willis says global capacity for large data center risks can reach $15 billion, but many projects buy more coverage than their exposure supports because risks are not properly modeled.
Willis, part of WTW, warned that the push to secure insurance capacity for data center construction may be causing many organizations to buy more coverage than their actual risk warrants. The broker argued that the better question is how much each project needs, rather than how much capacity the market can provide.
Willis said the global insurance market can offer up to $15 billion in capacity for large scale data center risks, describing that figure as a ceiling rather than a benchmark to pursue. It attributed over-insurance to gaps in risk modeling, noting that organizations often secure coverage that exceeds modeled exposure when underlying risks are not quantified accurately.
The warning comes as digital infrastructure investment accelerates globally. Swiss Re Institute estimates insurance premiums tied to data centers are expected to nearly double by 2030, rising from $10.6 billion to $24.2 billion, and Willis said hyperscale facilities can reach $30 billion to $40 billion in construction value before technology is installed.
Willis also pointed to how widely data center risk profiles can vary by factors like site selection, power infrastructure, construction methods, supply chain dependencies, climate exposure, and cyber vulnerabilities. It said resilience steps like flood protection, seismic design, heat adaptation, and wildfire mitigation, built in early, can reduce the risk profile enough that the appropriate insurance limit may be lower than what is bought without such mitigation.