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Data center buildout lifts insured losses tied to fire and water

Allianz Commercial said fire drove well over 50% of nearly $800 million in analyzed data center claims, while water damage led claim volume at 21%.

Reported · Written up by our desk · Industry & Deals

Data center expansion is reshaping what insurers pay for, with fire emerging as the biggest driver of loss severity even as water remains the most common cause of claims, according to Allianz Commercial.

In an analysis of 221 claims totaling about €677 million, or $782 million, the insurer found natural catastrophe activity ranked second by severity, followed by willful acts such as crime and cyber crime, and power failure. By volume, water damage accounted for 21% of claims, willful acts for 19%, and fire for 14%.

Allianz Commercial also said the sector is changing structurally, as facilities evolve from single-story sites into gigawatt-scale, multi-story campuses with on-site power generation and advanced cooling. It said those designs concentrate value in one location, raise structural and fire risk, and can increase exposure during testing and commissioning, when systems are pushed near operating limits.

The report highlighted emerging fire risks tied to lithium-ion batteries integrated into server racks, rather than kept in separate battery rooms, which it said can trigger thermal runaway that is difficult to control. It also noted construction and operations factors, including compressed schedules, late design changes, retrofitting, and prototypical equipment, that can allow small errors to cascade into major losses.

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