The data center boom has handed the insurance industry a problem it rarely faces at this scale: individual projects simply too large for the market to cover.
A traditional data center might once have needed around $2 billion in limits. Today a single hyperscale campus can demand $20 billion for the buildings alone, according to Swiss Re Corporate Solutions, which warns that the re/insurance industry can support only a fraction of those limits at competitive rates.
S&P Global Ratings estimates that the largest individual projects can represent as much as $30 billion in insurable value.
In contrast, Munich Re offers up to roughly $250 million in net capacity for a single data center construction project, brokers note; reaching $10 billion of coverage on one site means stacking a tower across 40 or more carriers.
Even the market's largest dedicated facilities fall short of the values now in the pipeline: Aon expanded its Data Center Lifecycle program to $3.5 billion in April, and Willis has assembled roughly $3 billion in hyperscale construction capacity.
"You simply cannot find enough capacity for $20 billion concentrated in one location," Patricia Kwan (pictured, a senior credit analyst in S&P Global's financial services ratings practice, told Insurance Business in a recent interview. "Insurers are not designed for that level of concentration."
"The demand and scale is exponentially growing, and the capacity cannot," Swiss Re's Michael LaRocca told attendees at this year's RIMS Riskworld conference, where he projected sector premiums climbing toward $24 billion, up from about $10.6 billion today.
The exposure is larger where these campuses are being built. Swiss Re's modeling finds that more than a quarter of US data center capacity sits in areas facing three or more large-hail days a year, and over 40% in zones with significant-to-very-high tornado risk.
Zurich reported that 64% of capacity under construction in 2026 lies outside traditional hubs such as Northern Virginia, pushing into interior markets where severe convective storms are common. A tornado at a data center site ranked among the leading causes of loss in Zurich's US builders risk book last year.
What becomes of the value no insurer will write? The gap ultimately flows back to the sponsor or developer, and it gets reflected in the ratings of the debt issued by the data center, Kwan said.
In practice, hyperscalers with strong balance sheets absorb the residual risk themselves, often through captives, echoing how oil majors such as ExxonMobil and Chevron have long self-insured deepwater projects when commercial capacity ran dry.
Meanwhile, relentless demand is driving new projects. The five largest cloud providers are forecast to spend around $600 billion on infrastructure in 2026, a 36% jump, and US data center construction reached a $50.7 billion annualized rate in April - now the single largest slice of US office-related construction, according to Census Bureau data.
S&P projects that construction-related coverage alone could generate $10 billion in premiums this year, roughly twice the size of the global aviation insurance market.
The response taking shape across the market is pragmatic: layered towers, coverage that "rolls" from one building to the next as phased campuses are commissioned, and a growing willingness to insure to estimated maximum loss rather than full replacement value. The latter, Kwan noted, is a structure that insurers prefer but lenders, who want full-value protection, often resist.
Kwan's deeper concern is whether the market truly understands what it is taking on. "Many campuses are built to withstand an EF4 tornado. They are highly engineered because developers understand they face wildfire, flood and wind hazards.
“That doesn't mean they're perfect. Engineering flaws can occur. That's where insurers come in. But there are simply not many insurers capable of underwriting these high-end data centers. If something goes wrong, losses could be enormous.”
