Q&A: Data centers – risks and claims trends 

This Q&A provides answers to questions about the data centers construction industry, drawing on key insights and findings from Allianz Commercial's experts.

Artificial intelligence (AI) adoption is creating a new infrastructure supercycle. As deployment shifts from training frontier models to powering millions of AI applications and autonomous agents, annual data center investment is projected to rise from around US$500bn in 2024 to more than UA$1trn as early as 2027. The opportunity extends beyond data centers to electricity generation, grid infrastructure, cooling, networking and semiconductors. 

Governments are becoming a major structural driver. Concerns over technological sovereignty, national security and geopolitical competition have prompted many countries to launch national AI strategies and direct public investment into domestic computing capacity. Because these investments are driven by strategic priorities rather than purely financial returns, they tend to be price-insensitive, reinforcing the sector's long-term outlook. 

According to Allianz Research, the US and China are expected to account for around 62% of new global capacity through 2030. In Europe, faster expansion is likely in Spain, Finland and Denmark, where power availability and permitting are more favorable. Across Asia Pacific, installed capacity is projected to grow from around 9GW today to more than 28GW by 2030, with Malaysia's capacity expected to increase more than tenfold. 

The key constraints are power, permitting and land — not financing. Competitive advantage is increasingly determined by access to electricity, grid connections, specialized equipment and skilled labor. The US construction industry alone faces a shortage of around 439,000 skilled workers. 

Infrastructure bottlenecks, supply chain constraints, regulatory hurdles and community opposition are increasingly shaping where AI infrastructure gets built. In the US alone, local opposition delayed or blocked at least 75 projects worth almost US$130bn during the first quarter of 2026. A few years ago, the Netherlands temporarily froze new hyperscale applications, while Ireland has introduced stricter requirements linking new grid connections to renewable generation. 

Around 79% of global data center capacity is already located in areas exposed to elevated natural catastrophe risk, and 54% faces chronic heat and drought stress. Many of the fastest-growing markets — including Northern Virginia in the US, Johor in Malaysia, and Marseille in France rank among the highest-risk globally. The same factors attracting investment, such as abundant land and power availability, often coincide with higher climate exposure. 

Risk profiles vary by region. Acute flood, wildfire and wind exposure is highest in the Americas, affecting 86% of capacity, while chronic heat and drought stress is greatest in Asia Pacific, where 89% of capacity is exposed. 

As data centers evolve from commercial real estate into mission-critical infrastructure, comprehensive insurance has become a prerequisite for financing large-scale projects. Construction costs for a single AI campus can exceed US$20bn, with insured values increasing substantially once high-performance computing equipment is installed. Lenders and investors increasingly require robust insurance programs throughout both construction and operation. 

The global data center insurance market is projected to grow from around US$11bn today to more than US$24bn by 2030. Demand is extending beyond traditional property cover toward integrated solutions spanning construction, engineering, business interruption, cyber and liability. 

According to Allianz Commercial analysis of insurance industry losses, fire is the leading driver of loss severity, accounting for well over 50% of €700 million worth of claims. Natural catastrophe activity ranks second, followed by wilful acts (including crime and cyber crime) and power failure. 

By frequency, water damage is the most common cause of claims, followed by wilful acts, fire and equipment breakdown. Business interruption is the primary driver of claims severity, underlining the high financial impact of operational downtime. 

Europe and North America dominate regional losses. By claims volume, Europe accounts for 53% and the US 36%. By severity, Europe accounts for 38% and North America 36%. 

Fire risk is changing as power density increases and battery energy storage becomes more integrated. Lithium-ion batteries, increasingly used in or near server environments, can create thermal runaway risk — a self-sustaining, high-temperature fire that is difficult to control. 

Fire suppression systems can also introduce risk. Accidental activation, vibration, noise, contamination or humidity can damage sensitive equipment. Restoration after a fire is often lengthy and complex, requiring specialist equipment, infrastructure rebuilds and careful assessment of whether damaged systems can be safely repaired. 

Real-life claims show that damage from hot works-related fires, have resulted in losses in the €50 million to €100 million range. 

Hyperscale and colocation facilities create significant accumulation risk. A single campus may bring together operators, multiple tenants, construction works, servers, utilities and on-site infrastructure in one location. One event can trigger claims across multiple policies — property, construction, business interruption, liability, cyber and financial lines. 

Shared infrastructure means failures affecting power, cooling or connectivity can impact many stakeholders simultaneously. Claims can also lead to contractual disputes, liability issues and reputational damage when uptime commitments or service level agreements are not met. 

Supply chain constraints compound this challenge. Lead times for critical equipment such as switchgear (up to 80 weeks) and transformers (up to 50 weeks) can extend reinstatement periods and increase business interruption costs. 

Effective risk mitigation must begin early and continue throughout the data center lifecycle: 

• Design phase: Purpose-built facilities, spatial separation, compartmentalization, and early fire and battery detection systems 
• Construction phase: Realistic schedules, strong quality assurance, and protected equipment storage 
• Testing and commissioning: Adequate time for fault-finding, clear contractor coordination, and robust safety culture 
• Operations: Preventative maintenance, cooling redundancy, leak detection, and business continuity planning 

Underwriters are increasingly focused on value concentration, site location, natural catastrophe exposure, interdependencies and accumulation across multiple insured interests. 

Ultimately, data center risk management requires a coordinated approach. Owners, operators, tenants, brokers, insurers and contractors need transparency around design changes, tenant changes and operational dependencies. A unified risk framework can reduce uncertainty, avoid coverage gaps, improve claims response and support the long-term resilience of this vital digital infrastructure.