(Bloomberg) --Soaring demand for insurance coverage related to data center construction is creating a "meaningful growth opportunity" for the industry, outstripping some traditional insurance markets, according to S&P Global Ratings.
The market for such coverage could reach $10 billion in premiums in 2026, analysts led by Charles-Marie Delpuech and Patricia Kwan said in a note published Monday. In comparison, annual premiums for the global aviation market are estimated at around $5 billion.
"Demand for large, specialized, power-intensive campuses is creating a meaningful growth opportunity" for the global insurance and reinsurance industries, the S&P analysts wrote.
The widespread adoption of artificial intelligence in recent years had propelled demand for new, larger data centers. Investments in the structures are expected to surpass $300 billion annually by 2030, according to S&P. Today, the 11,000 data centers in operation globally already represent more than $2 trillion of insurable value.
As individual projects keep growing in size, they may eventually represent as much as $30 billion in insurable value. Today, the largest infrastructure projects typically require coverage for as much as $10 billion, according to S&P.
Since no single insurer is able to take such large risks on its own, the industry is instead working to pool risks among insurance and reinsurance partners.
Hyperscale campuses also present fresh risks. For instance, business interruption is more complex for data centers, in part because of their interconnectedness with other campuses. Some risks remain only partially insured and require project sponsors to get coverage through self-insurance or seek alternative capital options.
Still, some commercial insurers have started providing larger coverage limits, with some stretching into the low-single-digit billion territory.
