The global insurance marketplace can now offer up to $15bn for large scale data centre risks, if needed, but cedants may need to rethink how they buy insurance, Willis has said.
A report by the broker said today that risks are “not being fully understood or quantified”, adding that many firms may be securing capacity that is “beyond their actual exposure”.
The report said digital infrastructure risks can vary based on site, power infrastructure, construction methodology, operational resilience, supply-chain dependencies, climate factors and cyber vulnerabilities.
The broker also said natural hazards and climate risks need to be assessed early in the development lifecycle to ensure adequate resilience measures are in place. This includes flood protection, enhanced wind resistance, seismic design enhancements, heat and drought adaptation measures, wildfire mitigation and blast resistance.
Willis said a cost-benefit analysis could also help organisations evaluation resilience investments and show a “stronger risk profile” to insurers, lenders and investors.
“The capacity is there,” said Alastair Swift, head of global specialties and the global digital infrastructure group at Willis. “The focus should be on using data-led analysis to quantify and differentiate exposure to secure appropriate insurance limits.”
He continued that “buying more insurance is not always the same as being better protected”.
Swift said: “When risks are properly modelled, understood and mitigated, clients can build more efficient, resilient insurance programs that reflect their actual exposures. This is especially important where lenders and equity partners expect robust protection; a more tailored approach can often deliver greater value.”
Figures from rating agency S&P Global Ratings in April estimated new insurance premiums from hyperscale data centres could reach around $10bn this year but has warned data centre risks are incredibly complex and not fully understood.
This was echoed by Swiss Re Institute, which said the rapid expansion of AI data centres was driving a rise in insurance demand. However, the Swiss reinsurer’s research division warned it could introduce poorly understood accumulation risks.
Companies:Willis
People:Alastair Swift