Swiss Re recently projected that global insurance premiums linked to data centers could increase from $10.6 billion to $24.2 billion by 2030. S&P has described hyperscale data centers as an emerging risk pool, noting that insurance availability can influence financing conditions and project economics - a signal that climate risk in the sector is transitioning from an operational concern to a capital markets one. New research from climate risk analytics firm First Street gives those projections their evidential foundation: 79% of global data center capacity sits in markets exposed to elevated flood, wind or wildfire risk.
The finding comes from First Street's report, Climate Risk in Global Data Center Markets: Implications for Investment and Performance, which examined 97 data center markets worldwide and assessed how climate-related hazards affect operating costs, infrastructure reliability, insurance conditions and long-term asset values. A further 54% of global data center capacity is located in markets exposed to chronic climate stressors - extreme heat and drought - that increase cooling requirements, reduce efficiency and pressure operating margins.
The regional divergence is significant for underwriters assessing where to deploy capacity and at what price. Exposure to chronic climate stress reaches 89% of data center capacity in Asia-Pacific markets, compared with 50% in the Americas and 46% in Europe, the Middle East and Africa. First Street placed Northern Virginia, Johor and Marseille - three of the industry's largest and fastest-growing markets - in the highest climate risk tier globally. Nordic markets ranked among the lowest exposed.
That divergence matters because markets with similar traditional investment characteristics - power availability, connectivity, land access, demand growth - can face substantially different operating conditions over the long term once climate factors are incorporated. Northern Virginia alone accounts for a significant share of global hyperscale capacity; its placement in the highest risk tier is not a marginal finding.
Global data center capacity is projected to nearly double again by 2030, driven by cloud computing and artificial intelligence infrastructure demand. US data center construction spending rose from $1.8 billion in 2014 to $28.3 billion in 2024, with 565 operating facilities and another 571 projects in development. Industry estimates cited by Goldman Sachs project global data center power consumption could rise by 160% by 2030, adding pressure to heat management, energy availability and climate-related operating challenges at precisely the moment those challenges are intensifying.
The sector's concentration characteristics add a further insurance dimension. Disruptions at major facilities can affect multiple businesses and industries simultaneously, creating potential for correlated losses across a single event - a dynamic that some insurers have identified as a source of systemic risk exposure.
First Street chief economist Dr. Jeremy Porter said climate location is already a major determinant of long-term operating cost. "Where you build a data center determines a large share of what it will cost to run for the next 20 or 30 years. Climate is a big part of that: cooling, water, and reliability all depend on location," he said, noting that many valuations continue to focus primarily on growth while placing less weight on climate considerations.
Matthew Eby, founder and chief executive officer of First Street, said the more fundamental challenge is the data underwriting models are using. "Most underwriting for real assets still uses historical data, but the climate is no longer behaving the way the historical record would predict. As heat, drought, and water stress increase, outdated models simply don't offer a complete view of risk anymore," he said.
S&P's projection that data centers could account for approximately 14% of US power demand by 2030, up from 5% in 2025, gives the scale of the exposure challenge its clearest single number. For insurers, reinsurers and the rating agencies monitoring both, the question is no longer whether data center climate risk is material - it is whether current pricing reflects it.
