The global surge in hyperscale data centers is intensifying risks associated with natural catastrophes and fragile supply chains, creating pressure points for the insurance market that are increasingly difficult to navigate. This construction boom represents one of the largest economic ventures in recent memory, anticipated to see another US$6.5 trillion funneled into data center projects by 2030, according to Achim Hillgraf, operations senior vice president at FM.
The unfolding demand places enormous value at risk—S&P Global Ratings estimates that insurable values for a single hyperscale campus can soar to between US$20 billion and US$30 billion, dwarfing the typical US$5 billion to US$10 billion limits typically seen for major infrastructure projects like bridges or tunnels. Even leading insurers like Aon and Willis are struggling to keep pace, with Aon raising its Data Center Lifecycle program capacity to US$3.5 billion and Willis securing approximately US$3 billion for hyperscale construction.
Kelly Kinzer, Zurich's global head of construction and surety, emphasized the market's deficiency in capacity to offer full-value insurance for such monumental projects, particularly amid growing lender requirements for comprehensive coverage. This gap is more than speculative; in March 2026, investment firms like Blackstone reportedly shied away from data center debt due to inadequate insurance offerings. Consequently, developers are increasingly forced to assume residual risks on their own balance sheets, often utilizing captive insurance setups.
Geographical Risk Variations
The geographical location of data centers presents diverse risk profiles. In the United States, Hillgraf warns of escalating threats from so-called secondary perils—these include convective storms, hail, tornadoes, and wildfires. Despite developers’ efforts to keep projects out of known catastrophe zones, inland sites remain vulnerable to severe weather. An alarming trend in Zurich's loss data shows that severe weather has been the primary cause of claims within its U.S. data center builders risk portfolio for three consecutive years, with a tornado incident causing significant losses in 2025. Furthermore, as of 2026, 64% of data center projects are being constructed outside traditional hubs, pushing development into areas with higher exposure to storms and hail.
Looking to Europe, the previously existing notion that the region faces lower catastrophe exposure is shifting. Hillgraf highlights climate change effects—such as flooding, windstorms, and the emergence of heat domes—as factors creating new risks for data centers. Cooling systems are particularly sensitive to these conditions, as failures in cooling represent the second most frequent cause of outages, following power issues, according to the Uptime Institute's Annual Outage Analysis. The growing demands from artificial intelligence applications further strain existing infrastructure, especially regarding power and cooling requirements.
Global Considerations and Supply Chain Fragility
In Asia, the risks expand further with the presence of typhoons, earthquakes, and volcanic activity. Hillgraf insists that developers should minimize exposure by steering clear of vulnerable shorelines and proactively integrating regional hazard assessments into construction plans from the outset.
The broader trends driving this construction surge also present significant challenges. Hillgraf notes that natural hazards are becoming more frequent and severe worldwide, implicating both direct facility risks and indirect supply chain vulnerabilities. As companies streamline operations for cost efficiency, they often find themselves operating with minimal buffers against disruptions, which can cascade from tariffs and trade barriers to natural disasters and geopolitical tensions.
For data centers, this fragility manifests as extended lead times for crucial components, such as transformers, switchgear, and precision cooling units. A property loss that could sideline other commercial facilities for weeks may leave data centers nonoperational for an extended period.
In response to these escalating risks, FM has launched a specialized unit, FM Intellium, dedicated to insuring hyperscale data centers globally from the construction phase. Hillgraf explains that their approach begins with site selection and continues with implementing physical protections tailored to withstand particular environmental challenges. "We're eager to engage early with our clients to support building resilient facilities that meet their operational needs," he concludes, reinforcing the need for strategic planning in this rapidly evolving sector.
