"We're going to need a $20 billion line." That's how Lloyd's chief underwriting officer Rachel Turk summed up the scale problem facing the data centre insurance market when she spoke at Aon's Navigating Market Cycles panel last October.
Her point wasn't simply that the numbers are getting bigger. If the traditional market cannot provide enough capacity quickly enough, increasingly sophisticated data centre operators have other places to put the risk. One of those places is their own captive.
The pressure is already visible in the UK. London added a record 193 megawatts of new data centre capacity in 2025, according to CBRE, making it Europe's largest and fastest-growing market for the asset class. National Grid has warned that data centre electricity demand could increase sixfold by 2035, while connection approvals are already taking years in some cases.
Underwriters are also having to rethink how they assess the sites themselves. HDI Global's analysis places London in a multi-hazard environment dominated by pluvial flooding and emerging water scarcity, with rainfall extremes expected to worsen.
But flood mapping only tells part of the story, according to Adrien Collovray, head of captive advisory for GB, Europe and international, and Anthony Toft-Brown, head of captive consulting GB, both at WTW.
"What we are seeing is climate and flood risk being incorporated into captives in much the same way as risks that have experienced increased retentions, reduced limits or exclusions," they said. "Captives have always existed to help organisations manage difficult to insure exposures."
For data centres, they said, attention is increasingly shifting from flood maps towards site-specific resilience, engineering controls and operational continuity. Captive owners can retain those exposures before using reinsurance, structured risk solutions or portfolio diversification to manage them.
"The insurance industry question is becoming less about where a facility is located and more about how it is engineered," Collovray and Toft-Brown said. "Insurance capacity for data centres is increasingly being determined by engineering resilience rather than simply natural hazard location."
The significance of that shift goes beyond climate exposure. Fitch Ratings' head of EMEA reinsurance ratings, Manuel Arrivé, told delegates at the Rendez-Vous de Septembre in Monte Carlo this month that data centres represent one of the biggest growth opportunities the re/insurance sector has seen in years, but warned that "there's accumulation risk leading to modelling risk, and reinsurers tend to be cautious at this stage."
That caution creates room for captives to retain risks the conventional market cannot easily accommodate. Lloyd's own market data points to why: revenue loss tied to service-level agreement breaches remains poorly covered by conventional wordings, and standard property policies typically exclude electronic data loss, a central concern for any data centre operator. Goldman Sachs analysis suggests the sector could ultimately generate US$5 billion to US$11 billion in annual premiums for the insurance industry.
"While captives can help address climate-related capacity constraints, they are increasingly being used to absorb cyber, outage and business interruption risks that the traditional market struggles to price, whether due to risk aggregation concerns or limited sector expertise," Collovray and Toft-Brown said.
For companies using them, that makes the captive less an insurance subsidiary for isolated difficult risks and more a strategic risk-financing vehicle sitting alongside conventional insurance and reinsurance. It does not mean less scrutiny of the underlying exposure.
"It almost always increases scrutiny," Collovray and Toft-Brown said. "A captive does not remove the need for robust underwriting or engineering assessment; if anything, it intensifies it."
Retaining part of the exposure gives the owner "skin in the game", they added, increasing the focus on risk control, resilience and loss prevention.
The sheer value of the infrastructure now being developed makes that alternative capacity increasingly relevant. Brokers are already building for it: Marsh expanded its Nimbus data centre construction facility to US$2.7 billion in capacity in January 2026, growing several times over within months as demand outpaced expectations.
"The AI boom is driving unprecedented infrastructure investment," said Ivan Gonzalez, CEO of Swiss Re Corporate Solutions. "Some of the largest AI data centres now carry total asset values exceeding USD 20 billion before technology installation, creating significant construction, operational and accumulation risks."
Those interconnected exposures require solutions beyond traditional insurance, Gonzalez said, combining risk engineering, alternative risk transfer and financing.
Captives themselves are not new to the sector. What is changing is the number of companies for which they may make economic sense.
"Captives in the data centre sector are not new, for companies with the scale to invest in the infrastructure of a captive the solution has been available and utilised for a while, notably across an operational portfolio," said Kate Fairhead, senior vice president at Marsh.
But growing companies and increased private equity investment are widening access to captive structures, she said. That can provide additional capacity for mega projects, protection against insurance-market volatility and a way to retain risks that remain difficult to transfer conventionally.
As data centre values climb, the placement challenge is therefore becoming less about finding a single market capable of absorbing the exposure and more about deciding how much risk belongs in each part of the structure. Conventional insurance, reinsurance and captives are increasingly being assembled together to provide capacity that no one part of the market may be willing to supply alone.
