The data centers powering artificial intelligence infrastructure are growing so large and complex that the insurance industry is struggling to cover the financial risks they carry, according to a report by the Swiss Re Institute.
Authored by Jonathan Anchen, head of market intelligence, and James Finucane, senior economist, both at the Swiss Re Institute, the report found that construction costs for a single data center site can reach US$20 billion – a figure that can double once servers and graphics processing units are installed.
Global insurance premiums tied to data centers are expected to climb to US$24.2 billion by 2030, up from US$10.6 billion, driven by growing demand from financing institutions requiring coverage matching the full cost of construction.
The report highlighted that more than a quarter of US data center capacity may be located in areas experiencing three or more large-hail days per year. More than 40% of capacity could be situated in significant-to-very-high tornado zones, where at least three days annually record tornadoes of Enhanced Fujita 1 strength or greater.
“A tornado’s swath and debris field can readily traverse separated structures in the same campus, damaging multiple buildings simultaneously,” the authors wrote.
Developers are increasingly clustering large data center campuses within roughly 20 miles of one another, such as in Abilene, Texas, and Virginia, raising the risk that a single natural catastrophe event could strike multiple high-value locations at once.
The report cited an FM Global study showing that fire accounts for just 10.9% of data center loss events but 42.3% of loss costs. The integration of lithium-ion battery backup units into server racks creates an ignition source that “did not previously exist” within data processing equipment rooms, the report noted.
Liquid-related losses accounted for nearly 24% of total data center loss costs in the same review. High-performance GPUs now require direct-to-chip liquid cooling, and the scale of those networks creates new risks stemming from improper installation or maintenance.
Power supply remains the leading driver of business interruption, accounting for 45% of outages, according to the Uptime Institute. Traditional servers required 5 to 15 kilowatts per rack; AI servers can exceed 100 kilowatts per rack. Around 30% of planned US data center capacity could include on-site power generation, the report highlighted.
The report warned that large data centers are sometimes presented to insurers through separate programs, covering buildings, equipment, and power plants independently, making it difficult to track overall exposure. The authors noted that underwriting success in this environment depends on specialized technical assessment and disciplined accumulation management.
In September, a lithium-ion battery explosion triggered a fire at South Korea’s National Information Resources Service data center in Daejeon, shutting down hundreds of government digital services, according to CNN. The blaze disrupted mobile identity verification for banking and airports, postal services, transportation systems, and the government’s internal intranet. South Korean president Lee Jae Myung issued a public apology, called the incident “foreseeable,” and ordered comprehensive infrastructure inspections across all government agencies.
Then in May, a 12-hour fire at a NorthC data center in Almere, Netherlands, which housed infrastructure for IBM Cloud, among others, knocked services offline across multiple sectors. Utrecht University closed most of its buildings after its network and applications went down. Bus and tram dispatch services were disrupted, hospitals reported partial system outages, and the national statistics bureau CBS experienced prolonged downtime, according to Data Center Dynamics.
