A maturing insurance market for data center buyers

The commercial insurance market for data centers remains highly competitive, fueled by strong insurer appetite, abundant capacity, and growing confidence in the sector. Carriers — including both established insurers that are deploying more capacity and new entrants — are competing aggressively on both price and coverage terms.

Insurers are confident about an industry that has matured rapidly over the past several years. While data centers themselves are not new, the scale, complexity, and pace of development have increased dramatically, driven by cloud computing, AI adoption, and growing digital infrastructure demands.

As underwriters have evaluated more projects and built larger data center books, they have become more comfortable assessing prospective policyholders and distinguishing stronger risks from weaker ones. Loss experience has also contributed to insurer enthusiasm: Despite the substantial values associated with many projects, claims activity has generally been limited. As a result, insurers increasingly view data centers as attractive risks compared with other real estate and construction asset classes.

Property-related exposures continue to dominate the risk profiles for data center owners and developers. Builder’s risk, property/business interruption, and delay in startup coverage remain essential, given data centers’ potential for losses related to long-lead equipment, operational downtime, and revenue losses. All of these can present significant financial consequences, particularly when tenant commitments or project completion schedules are adversely affected.

At the same time, the market has evolved to address far more than traditional property risks. As insurers and brokers have gained experience with data center projects, many historical coverage gaps have been resolved through improved policy forms and more refined underwriting approaches. Issues that once created uncertainty, such as the transition from construction to operational coverage, are now handled more routinely by leading carriers.

This evolution has shifted attention toward risks that have historically been difficult or impossible to insure. New coverage solutions are emerging to address nontraditional exposures, including service-level agreement liabilities, operational downtime events that do not involve property damage, and certain regulatory or development-related challenges.

Regulatory scrutiny is becoming a more important consideration for data center developers, particularly in jurisdictions facing concerns around land use, power consumption, water resources, and community impact. Many of the challenges facing developers today stem not from formal regulations themselves, but from community resistance and political pressure generated during the development process.

Developers are increasingly recognizing the importance of engaging local stakeholders early rather than waiting until projects reach the permitting stage. Industry participants have learned that proactive outreach, clear communication, and community engagement can help mitigate opposition and improve project outcomes. Conversations focus on the economic and social benefits data centers can bring, including infrastructure investments, tax revenue, construction employment, and long-term economic development.

As regulatory scrutiny evolves, insurers are also exploring new products and solutions that could help clients address some of the risks associated with permitting delays, moratoriums, and changing regulatory requirements.

Although pricing remains highly competitive, underwriting scrutiny has increased as insurers have become more knowledgeable about the sector. Underwriters are largely comfortable with data center risks, but greater familiarity has led to more targeted and detailed reviews.

Insurers are paying particular attention to battery technologies and energy storage systems. Underwriters frequently request significant additional information about these components to better understand potential loss scenarios and operational dependencies. Data center insurance buyers are often encountering longer lists of technical questions and information requirements than they did only a few years ago.

Importantly, this scrutiny is not necessarily a sign of reduced insurer appetite. Instead, it reflects carriers’ greater sophistication and the refinement of underwriting approaches as they build larger data center portfolios.