When you have perils that could trigger payouts that are extremely large combined with a relatively new class of insureds (hyperscale data centers), the actuaries chew their pencils before saying yes.
From Artemis, July 10:
Insurance capacity constraints for data centres to drive ILS use: S&P
With capacity constraints likely to limit the insurance industry’s ability to fully insure hyperscale data centre projects, given their scale and complexity, a new report from S&P notes that this will drive greater use of self-insurance through captive insurers, and potentially, alternative capital such as insurance-linked securities (ILS).
The rating agency’s latest report suggests that rising demand for data centre insurance coverage could generate $10 billion in new premiums in 2026, highlighting how significant the data center market could become and the scale of the opportunity for the global re/insurance industry.
At the same time, S&P also indicated that annual investment in data centres could surpass $300 billion by 2027, highlighting the industry’s explosive growth and the growing insurance requirements associated with large-scale infrastructure development.
For background, S&P pointed out that insurance coverage limits of $5 billion to $10 billion are usually needed for the biggest infrastructure construction projects, like bridges or tunnels. By comparison, some hyperscale data centers are estimated to represent total insurable values of $10 billion to $30 billion for construction alone....
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