The artificial intelligence boom has turned data centers into one of the hottest infrastructure plays in the United States. Billions of dollars are flowing into hyperscale campuses nationwide, as investors race to support surging demand for cloud computing and AI workloads.
The increasingly complex ecosystem surrounding data centers - from engineering and construction to investment management and executive decision-making - is creating a broad range of professional lines exposures that many insureds are only beginning to understand.
Amwins specialists said that while brokers have spent years analyzing the property, cyber, and environmental risks associated with these facilities, the implications for professional liability haven’t been scrutinized as closely.
Kevin Healey (pictured on the right), senior vice president at Amwins and professional lines specialist, said that at the construction level, data centers present unusually high-stakes design and engineering exposures.
Facilities require specialized cooling systems, uninterrupted power supply, fiber connectivity and increasingly sophisticated energy infrastructure. This means that even relatively minor design flaws can produce outsized financial consequences.
“These projects are being built very quickly, and if one issue goes wrong - whether it’s a transformer, a racking system, or a cooling retention pond - and it delays the opening of the data center, the resulting claims can be massive,” said Healey.
Insurers are increasingly focused on architects’ and engineers’ errors and omissions (E&O) risks tied to geotechnical studies, drainage systems, permitting, power generation and cooling infrastructure. Contractors also face exposures related to grading, vertical construction and installation failures.
The sheer size of projects has fueled growing demand for owners’ protective professional indemnity (OPPI) coverage, which sits above the insurance carried by architects, engineers and contractors. The policies are designed to protect owners if underlying insurance limits are exhausted or prove inadequate after a major loss.
“These data centers are increasingly complex and expensive. You’re seeing projects that cost billions and billions of dollars,” noted Healey. “The subcontractors, lead designers, and contractors may bring a certain amount of insurance to the table, but it’s nowhere near the actual cost of the data center. If there’s a loss and the insurance is inadequate or exhausted by another claim, the OPPI provides an added layer of protection for the owner.”
At the same time, firms developing data centers through real estate investment vehicles face an additional layer of financial and fiduciary exposure. Investment managers, fund sponsors and private equity-backed developers increasingly require combined professional liability programs covering both construction and investment management services.
Those risks include allegations tied to capital raising, valuation methodologies, due diligence, SEC disclosures and conflicts of interest. Errors in net asset value calculations or misrepresentations around projected returns can trigger claims for breach of fiduciary duty, negligent misrepresentation or regulatory violations.
“Data centers are evolving almost like venture-capital investments,” said Matt Sheehan (pictured on the left), executive vice president and professional line specialist at Amwins. “The pace of development is so fast, and there’s so much money flowing into the space, that penciling out long-term returns is difficult.”
Directors’ and officers’ (D&O) liability is becoming another focal point for underwriters. As communities grapple with the impact of AI and hyperscale infrastructure on electricity grids, water supplies and employment, executives face growing scrutiny from regulators, investors and local governments.
“There’s already a popular belief that AI is going to take jobs away,” Sheehan said. “You can get significant public backlash.”
That scrutiny is beginning to influence underwriting behavior. Brokers said insurers are tightening underwriting standards around data center business, particularly as aggregation concerns mount and carriers accumulate exposure across multiple projects and hyperscaler clients.
“Six to eight months ago, the market was pretty hot and heavy,” said Healey. “Underwriters were comfortable with these exposures. But as they’ve seen more of these projects, they’ve become wiser and understand them better.”
Carriers are increasingly asking detailed application questions around water consumption, permitting, power sourcing and project location. Some insurers have introduced bespoke endorsements clarifying coverage intent for data center risks, while others are applying exclusions or sub-limits around delay-related losses, faulty workmanship and regulatory investigations.
At the same time, underwriters are paying closer attention to regulatory claim triggers and disclosure practices, particularly as the Securities and Exchange Commission sharpens guidance around AI-related disclosures and operational resilience.
Despite these concerns, executive liability pricing remains relatively competitive because broader D&O markets remain soft. However, the Amwins specialists warned that conditions could harden quickly if claims activity accelerates.
To secure favorable coverage, insureds must demonstrate disciplined risk management and transparent governance. Contract structures remain central, particularly for developers working with hyperscalers such as Google and Amazon, which often push liability downstream through aggressive contractual requirements.
Healey advised insureds to negotiate clear liability limitations, require subcontractors to carry meaningful insurance limits and implement rigorous onsite quality controls. Realistic construction timelines are also critical given supply chain constraints around transformers, racking systems and power infrastructure.
For executives and investment managers, disclosure discipline is crucial. “You need to be fair and accurate in your disclosures to local governments, taxing authorities and investors,” Sheehan said.
Sheehan also stressed operational resilience: cybersecurity controls, redundancies and system segregation can help mitigate both operational and board-level liability exposures related to downtime events.
Data centers are expanding beyond traditional hubs such as Texas, Georgia and Arizona into smaller communities. To support this growth, an entire supporting ecosystem is also emerging around such facilities, including dedicated power plants, retention pond infrastructure and even small nuclear reactor projects.
These developments will draw greater regulatory and underwriting scrutiny but also create an opportunity for brokers to differentiate through specialized knowledge and manuscript policy wording.
“We view every data center as unique,” Healey said. “Each project requires individual attention and customization depending on how it’s structured.”
“The pace of change and the sheer amount of money chasing this sector create almost unquantifiable risk, but it’s also a huge opportunity,” said Sheehan. “The better you can tell the story of where your insured fits within the data center supply chain, the easier it is to mitigate underwriter concerns.”
Learn more about Amwins professional lines capabilities here.
This article was produced in partnership with Amwins
