How insurable is your data center?

The industrial data center market is one of the fastest-growing segments within commercial real estate, driven primarily by surging demand for computing power due to artificial intelligence (AI). No longer a niche asset class, data centers are quickly becoming core infrastructure, with global investment projected to reach approximately $6.7 trillion by 2030.

While this demand is reshaping the broader real estate market, pushing land values higher in locations with access to reliable power and accelerating the adaptive reuse of older industrial and office buildings, it is also changing the risk profile in ways that traditional underwriting models do not always address. Data centers concentrate high-value equipment and critical infrastructure in a single location, where even a short disruption can carry significant operational and financial consequences.

This means insurers are underwriting data centers more carefully with increased scrutiny on operational risks and loss drivers. Rising loss severity and tighter liability terms may shift more risk to owners. Insurability is no longer defined solely by the asset itself, but by how well a facility can operate under stress.
 
For data centers, that means more scrutiny of the systems that keep facilities running: power reliability, cooling performance, and fire protection design. It also means owners may need to show how well core systems can withstand disruption.

Retrofitting data centers: what insurers look for

Retrofitting existing buildings for data center use has become an increasingly popular path for owners looking to move quickly and reduce upfront development costs. But retrofits can introduce risks that aren’t always obvious once the facility is finished, and insurers are closely evaluating how well legacy structures have been adapted to meet the demands that modern data center operations require.

Two common retrofit approaches: 

• Adaptive reuse. Repurposing warehouses and older office properties can unlock value in underutilized assets, but these buildings were typically not designed for the power density, cooling loads, or redundancy standards data centers require—and bringing those systems up to spec can add substantial complexity and cost.
• Updating existing data centers. AI workloads demand significantly more power per rack than traditional computing. Facilities built even five years ago may need major electrical and cooling overhauls to meet current demands.

With any type of retrofit, the underwriting concern is the same: how well critical systems have been built to perform under stress, and how well owners can demonstrate it.

3 keys to data center insurability

For owners and investors, improving insurability starts with understanding how infrastructure decisions affect underwriting. In today’s market, coverage is determined by clear evidence of how data center infrastructure—whether a ground-up build or retrofit—is built to withstand disruption.

1. Power reliability directly influences business interruption exposure.

Power reliability is one of the first areas insurers evaluate, and one of the most common drivers of business interruption exposure. Individual IT and data center outages can cost organizations more than $100,000, with one in five exceeding $1 million, underscoring the financial impact of even short disruptions.

Insurers are closely evaluating:

• Whether power architecture reduces the likelihood of total system failure
• The reliability and testing history of backup generation systems
• Exposure to grid instability and how that risk is mitigated

These factors can influence coverage availability, limits, retentions, and how business interruption risk is priced. 

2. Cooling system performance is evaluated as property and operational risk.

Cooling failures are not just equipment issues. They are loss events that can trigger both property damage and extended downtime.

Insurers are evaluating:

• The likelihood of system failure under load or stress conditions
• How failures are contained versus allowed to cascade
• The degree to which performance is monitored and validated over time

Facilities where cooling risk is well understood and documented may be better positioned for more stable terms and fewer restrictive underwriting assumptions.

3. Fire protection design is a key driver of loss severity estimates.

In high-density environments, insurers are less focused on whether fire protection exists and more focused on how effectively it limits loss. 

Underwriting considerations include: 

• How quickly events can be detected and contained
• The expected scope of damage in a worst-case scenario
• Whether suppression methods introduce additional exposure to the equipment

These elements can influence how insurers model potential loss size, which may affect insurance capacity and pricing.

Managing data center risk starts with what you can prove

For data center owners, operators, and insurers alike, the risks that matter most are the same: power reliability, cooling performance, and fire protection design. They are also the ones most within your control. Insurers are focusing more on demonstrated performance than on stated capabilities, making documentation especially important.

In an industry where a single outage may cost millions, the quality of a risk profile may affect coverage availability, retention levels, and long-term financial exposure.

To learn more about how these trends and others are shaping the broader commercial real estate market, download our Real Estate Risk and Resilience report, or reach out to a Marsh McLennan Agency expert to learn how we can help your organization navigate changing insurance considerations.