U.S. property insurers face data center coverage shift as AI projects expand

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Property insurers adapt to AI

Highlights

AM Best reports surging demand for specialized insurance among U.S. data center developers as project scale, value, and complexity rise with expanded AI deployments.
Business interruption coverage is increasingly critical for data centers as hyperscale AI operations elevate the risk and impact of complex power outages, stretching traditional property/casualty frameworks.
Insurers face expanded risk exposure from data center construction and operations, including revenue loss, physical damage, and substantial capital requirements affecting both underwriting and balance sheets.

AM Best outlines emerging coverage needs

As reported by AM Best, its new special report says data center developers and owners are driving demand for more specialized insurance solutions as projects grow in size, value and operational complexity.

The report says business interruption coverage may be the most consequential protection for data center owners because AI operations can run at massive scale and raise the likelihood and impact of highly complex power outages. It adds that traditional property/casualty coverage frameworks are being stretched by risks the industry has not previously encountered at this level.

AM Best quotes David Blades, associate director, Industry Research and Analytics, as saying that insurance coverage is evolving alongside the spread of data center development and construction. The report also notes that larger, so-called hyperscale data centers are drawing the most scrutiny because of their rapid growth, their physical scale and their impact on local communities.

Power, construction and financing risks widen exposure

The report highlights power demand as a central concern, with one estimate indicating that a modern AI data center can use as much electricity as about 100,000 homes. It says developers insist infrastructure must expand if the United States is to remain competitive in global AI, making energy availability and affordability a major issue for the sector.

Beyond electricity use, the report points to water consumption, mineral needs, electric grid investment, staffing and labor costs as additional risk factors that can affect underwriting. Potential exposures include revenue loss from partial or total shutdowns, physical damage during construction under builders risk policies, and direct losses tied to damage to buildings, servers and other equipment.

AM Best also says insurers may face balance sheet exposure because of the significant capital needed to finance data centers, including through private credit investments or other financing arrangements. That broadens the sector's risk profile beyond underwriting and into the asset side of insurers' operations.

Our earlier coverage of UK manufacturers’ high energy-cost warning explained how elevated electricity prices are eroding competitiveness and prompting some firms to move—or consider moving—production overseas. We noted that industry groups were urging the government to widen and ускорить bill relief, arguing that delays and broader political pressures could put jobs and industrial capacity at risk.

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