Soaring investment in hyperscale data centres is often framed as a major new growth engine for insurers. But beneath the headline numbers, some of the world’s biggest technology firms are still keeping a surprisingly large share of their risk on their own balance sheets, according to S&P Global Ratings.
Speaking to Insurance Business about S&P’s recent work on data centre insurance, analysts Patricia Kwan and Charles‑Marie Delpuech stressed that while premium potential is real, the industry needs to be clear‑eyed about how much of these mega‑projects is actually insured – and how much is not.
“The way we see it is that you are talking about multi‑billion‑dollar campuses, but the insurance portion is only a third, maybe at best half of it,” Kwan said, noting that the rest of the risk is effectively retained by the largest hyperscalers.
That sits uneasily alongside the narrative of a potential US$10 billion premium pool around data centre construction. The investment story is not wrong, but S&P’s analysts are keen to show that it only captures the part of the risk insurers are willing and able to take.
One reason for the gap is simple cost pressure. Sponsors and investors remain highly sensitive to how much premium they pay before a site is even operational.
“You have these investors come back and say, ‘Wow, the dollars that they put into these data centres, there’s an upfront fund fee and this is just insurance alone, and this is before the profits come in,’” Kwan said. “So there’s a lot of tension in this area.”
Market capacity and risk appetite are the other half of the picture. Delpuech pointed out that older‑style facilities tended to be much smaller and far easier to fully insure under standard property and construction programs, whether in North America or Europe. The real stress only emerges at the new hyperscale level, where a single campus can represent tens of billions in insurable value and no carrier can realistically write the whole risk.
“The gap is really on those hyperscale data centres, and the gap will persist as long as they are that big and the insurance market is not providing those covers,” he said. “So you have this challenge, and it is not going away quickly.”
From a ratings perspective, the inability to buy limits that match the full replacement cost of a mega‑campus is not automatically a red flag. Delpuech emphasised that, to date, insurers have resisted the temptation to over‑extend themselves simply because a fashionable new class of risk is attracting capital.
“For us, the positive thing is that there is a clear need and a clear demand, and at the same time, the kind of gap that is seen shows the discipline in the insurance industry,” he said. “We see the industry remaining disciplined and cautious in the way they go into that space.”
For now, that leaves global technology giants in a hybrid position. They rely on insurers for a meaningful slice of construction and property protection, along with ancillary covers such as liability, workers’ compensation and, in some jurisdictions, surety and credit insurance linked to project performance. At the same time, they accept that a significant proportion of their exposure will remain outside conventional insurance and must be financed through their own resources, captives or alternative structures.
Kwan stressed that this pattern is not unique to data centres, and said S&P will look closely at which insurers have the depth to handle such business.
The current level of self‑insurance should not, however, be seen as a permanent structural feature. As the segment matures, S&P expects new forms of risk transfer to develop alongside traditional co‑insurance and reinsurance towers.
“We already see that the insurance offering will not just be private insurers and reinsurers,” Delpuech said. “There will be insurance solutions backed by alternative capital markets – like catastrophe‑bond‑type coverage – because you need to find other sources of capital when there is a lack of capacity from the traditional market.”
He also warned that behaviour on both the demand and supply side could change quickly after a major event. “You may only need one very outsized large loss in one of those hyperscale data centres to make the market move,” he said. “That could multiply the loss experience and push some of the risks that are now self‑insured to make their way into the insurance market.”
