80% of new data centers face heightened catastrophe risk: Allianz

Insurance is becoming a critical enabler of AI infrastructure, but 80% of these critical facilities are being built in areas with a heightened risk of natural catastrophe, according to Allianz's latest report on the current data center boom. 

By 2030, the global data center insurance market is expected to more than double in value to $24 billion. With annual investment in data centers projected to reach $1 trillion as early as 2027, risk management opportunities are growing for managing physical assets, interdependencies, concentration risk and operational resilience. 

Data centers are unlike traditional commercial properties, and their risk profile is changing. Facilities are becoming increasingly complex and interdependent — these facilities rely on on-site power generation and have high-density equipment, advanced cooling systems and complex connectivity with power grids, local water supply and data, according to Allianz.

"For insurers, the key question is not only the value of the building, but the concentration of value and dependency inside and around it. Power, cooling, batteries, fiber routes, testing and commissioning and business continuity planning are all part of the same risk picture. Effective risk mitigation must begin early and continue throughout the data center lifecycle. Resilience must be designed in from the earliest planning stage," said Christian Kolbe, global head of construction claims at Allianz Commercial, in the press release.

Allianz's analysis shows that fire damage is the greatest driver of loss severity, though it is rare, accounting for 59% of loss worth $800 million. Natural catastrophes follow in claims activity at 12% — though climate resilience is emerging as a major issue for data centers, given the heightened natural catastrophe risks where they are built, according to Allianz. Water damage is also a concern as the most frequent cause of data center claims. The report finds that the U.S. accounts for 36% of global claims volume regarding data centers.

"AI is turning the latest generation of data centers from a specialist real estate asset into mission-critical infrastructure," said Thomas Lillelund, CEO of Allianz Commercial, in the press release. "The scale of investment is extraordinary and, as these centers evolve beyond traditional data storage to high-performance compute demands, success will increasingly depend on resilience: access to power, reliable supply chains, robust construction controls, as well as climate-aware site selection and insurance programs that reflect the true accumulation risk. Indeed, comprehensive insurance cover has become a prerequisite for financing many large-scale AI infrastructure projects."