A single 45-minute outage at a large data center could trigger a $24 million service credit loss and wipe out more than 40% of annual cash flow, according to a new report from Parametrix, the Lloyd's of London coverholder specializing in digital infrastructure insurance.
The paper, titled "An Introduction to Data Center SLAs: Key Terms, Financial Risk, and Underwriting Implications," explains how Service Level Agreements (SLAs) governing uptime, availability, latency, and power, among others, can translate rapidly into material financial exposure.
The warning arrives as investment in digital infrastructure reaches unprecedented scale and the insurance market races to keep pace.
The 11,000 data centers currently in operation globally already represent more than $2 trillion of insurable value, with the data center insurance market projected to reach $10 billion in premiums in 2026, roughly double the size of the entire global aviation insurance market, according to S&P Global Ratings.
Meanwhile, US data center construction spending has soared from $1.8 billion in 2014 to $28.3 billion in 2024, with 565 operating facilities and 571 planned projects recorded as of late 2025. The capital intensity of individual projects is also climbing sharply. Average data center project values have surged from $150 million to $3 billion, with top hyperscalers planning about $710 billion in capital expenditures in 2026 alone, creating significant capacity strain for insurers and pushing programs into layered structures across multiple carriers.
Despite the growth of purpose-built programs, SLA exposure remains one of the least addressed risks in conventional data center insurance.
Standard commercial property policies require physical damage to trigger business interruption coverage, leaving operators exposed when outages occur without facility damage. Power supply also causes 45% of data center outages, and for hyperscale operators, business interruption is harder to structure than conventional property because downtime is tied to computing capacity and interconnected campus dependencies. That complexity is compounded by SLA contractual obligations that run independently of whether a covered loss has occurred under the insurance policy.
Business interruption is typically the largest single premium component in an operational data center program, often exceeding property coverage, because data centers carry high revenue relative to property value and BI premiums scale with revenue.
The report argues that conventional underwriting frameworks built around physical damage and tenant creditworthiness are insufficient for an asset class whose primary financial risks are contractual and operational rather than structural.
For lenders financing data center projects, even a stabilized asset may not be truly stable unless its SLA risk is accounted for, since a single performance failure could destabilize cash flows and breach debt covenants. Stress testing against SLA-related revenue loss and tenant exit scenarios, alongside conservative loan-to-value ratios, is now considered a baseline requirement.
"SLA exposure is consistently one of the biggest concerns because it sits at the intersection of operational resilience, contractual liability, revenue stability, and capital availability," said Tsafrir Oranski, VP of digital infrastructure at Parametrix.
