Tech-driven property risks are quickly emerging as a new and distinct class of business for the property insurance market, bringing with them unprecedented values and a swath of exposures that can run into the billions.
For insurance brokers, these accounts present both opportunity and complexity, particularly as insureds increasingly turn to the E&S and specialty markets to secure capacity. According to Andy Hendrix (pictured), E&S Property EVP at Westfield Specialty, the defining characteristic of these risks is scale.
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Global data center capacity is growing at double-digit annual rates, driven by cloud computing, artificial intelligence and digital infrastructure demand. Individual hyperscale facilities can carry total insured values (TIVs) ranging from $1 billion to more than $5 billion, depending on equipment density and redundancy.
“The size of these risks is massive compared to what we see in the general commercial market,” said Hendrix. “The concentration of risk and the values associated with some of these data centers and server farms make them challenging from a risk assessment standpoint.”
That challenge extends well beyond total insured values, according to Hendrix. He pointed to valuation uncertainty around highly specialized equipment housed inside data centers and server farms. In a severe loss scenario, such as a major natural catastrophe, replacing billions of dollars’ worth of servers raises difficult questions about restoration timelines, supply chain constraints and demand surge pricing.
“A lot of these scenarios haven’t fully been played out yet,” he said. “We haven’t seen what the underwriting performance of some of these risks will ultimately be.”
While data centers and server farms are not new occupancies, the speed and scale of development has accelerated sharply. Hyperscale facilities supporting cloud computing, artificial intelligence and cryptocurrency operations are being built at levels far beyond what the market historically contemplated. That has left insurers, reinsurers and brokers working in real time to understand how losses could unfold.
Despite the uncertainty, Hendrix said the property market remains open to these risks. Capacity, however, is being deployed cautiously. “Everybody is dipping their toe in a bit with shorter lines and syndicated placements,” he noted. “No carrier wants to be too heavy on these tech-driven risks, but they also understand this is a growing sector that is aggressively looking to transfer risk into the insurance market.”
One of the most difficult aspects of these placements, said Hendrix, is business income. Brokers and underwriters alike struggle to quantify the true exposure because data centers often support thousands of downstream clients, creating complex interdependencies that can magnify losses far beyond the physical damage.
This uncertainty becomes even more pronounced when insureds seek exceptionally high limits. Hendrix has seen requests for $1 billion to $2 billion in business income coverage tied into property programs for large data centers.
“Is that number accurate? Is the true exposure $10 billion? Is it less?” Hendrix asked. “I don’t think anybody fully comprehends yet what the real downside scenario is.”
Although the property market remains well capitalized, Hendrix cautioned that there is a practical ceiling on how much limit can be assembled for a single risk.
Building multi-billion-dollar towers requires broad syndication across Lloyd’s, the E&S market, Bermuda and the reinsurance sector, often supplemented by third-party capital. “It can be done, it can be built,” Hendrix said, “but at what cost?”
Cost considerations are forcing insureds to make strategic decisions about risk retention. High prices per million and minimum premiums mean many buyers are opting to retain more risk through large deductibles, aggregate structures or captives.
Hendrix said this reflects a broader market stance on emerging risks: carriers are willing to accept volatility from large, catastrophic losses, but not ongoing attritional claims. Smaller losses from water damage, theft or vandalism are increasingly being pushed back to insureds.
This is where the E&S market’s flexibility becomes critical. Filing constraints and standardized forms in the admitted market make it difficult to address the bespoke needs of these accounts.
By contrast, E&S underwriters can tailor terms, conditions and structures to reflect each facility’s unique risk profile. Hendrix emphasized that brokers are leaning heavily on that expertise. “There’s a lot of collaboration back and forth on what makes sense for the market and what makes sense for the insured,” he said.
Looking ahead, Hendrix expects tech-driven property risks to continue growing, though they will remain a relatively small slice of the overall commercial property market. Increased site visits, deeper engagement with risk managers and more transparent data sharing should gradually improve underwriting confidence in time.
“We’re open and want to work with brokers and clients to find solutions,” Hendrix said. “This isn’t a hard no. It’s about being creative, solution-focused and building programs that work for everybody.”
