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Insurers face rising data center risks in business interruption and power
Aon expects business interruption, contractor credit and power infrastructure to move higher on insurers’ agenda over the next 12 months, as proposed data center projects scale to tens of billions of dollars.
The insurance industry has added capacity for data center construction, but risk leaders at Aon say the next challenges are shifting to business interruption, contractor credit and power infrastructure as projects grow, become operational, and increasingly rely on dedicated generation, Insurance Business reports.
Joe Peiser, CEO of risk capital at Aon, said these risks are being amplified by the extraordinary scale of projects under consideration. He cited proposed developments regularly reaching tens of billions of dollars, including examples of $20 billion, $30 billion and $40 billion projects, with some approaching $100 billion worldwide.
Peiser also pointed to Aon expanding its Data Center Lifecycle Program capacity to $5 billion, while noting the average construction value of facilities placed through the program is about $1.9 billion. He said the available limit may be insufficient for every project, particularly where third-party financing requires more insurance than a hyperscaler would typically buy.
He added that builders’ risk has been the primary focus, but campus-style developments can bring different buildings online at different times, creating uncertainty over where construction coverage ends and operational coverage begins, and potentially causing insurers to provide two limits on the same development. Peiser said the operational phase is likely to bring greater attention to business interruption, especially when a hyperscaler owns and operates a facility for its own use rather than leasing space to tenants, according to Insurance Business.