James Boesen
Vice President | Business Insurance Producer
By 2030, the global investment in digital infrastructure is projected to reach an astounding $3 trillion, with approximately one-third dedicated to brick-and-mortar data centers. This projected growth reflects the important role data centers play in the digital economy—driven in part by rising demand for AI and hyperscale computing. This expansion amplifies complex risk-management challenges across the interconnected data center ecosystem, including power, construction, supply chain, labor, and capital.
Understanding data center risks
Data centers are not standalone assets; they are part of a complex ecosystem where multiple stakeholders—including utilities, developers, contractors, equipment manufacturers, and capital providers—must coordinate closely. When any part of this ecosystem falters, the consequences can extend beyond project delays to affect revenue, contractual performance, and long-term asset value.
One of the most pressing risks is power availability. U.S. data center electricity demand is expected to add roughly 50 gigawatts (GW) by 2030, with global capacity nearly doubling to 100 GW. Meeting this demand may require careful coordination among utilities, renewable energy providers, and developers, each scaling at different paces. Interconnection timelines—the process of connecting a facility to the electric grid—can extend years beyond construction schedules, which may require operators to secure power capacity well before projects are financed or built. Delays in power generation or phased delivery can pause revenue generation and may expose operators to contractual penalties and service-level obligations.
Industry reports also note extended lead times for specialized equipment: transformers, generators, and gas turbines are reported to have lead times of 12 to 48 months. Hyperscale buyers may secure priority access to constrained supply, driving up costs and creating shortages for other developers. A delay in a single critical component may halt commissioning, trigger penalties, and disrupt project timelines.
Labor shortages remain a consequential challenge. Data center construction often requires specialized engineering and construction disciplines that are in high demand and, in many markets, short supply. Concentrated development in key U.S. markets can intensify competition for skilled labor, contribute to wage inflation and extend timelines. Greater reliance on less experienced crews may increase execution and safety risk, and delays during commissioning can be particularly costly.
Tailored data center risk management solutions
Traditional risk-transfer approaches—such as defaulting to full replacement-value insurance or applying maximum project limits—can be less effective and more costly for some billion-dollar data center projects. Instead, industry best practice favors a more nuanced approach that aligns risk transfer with actual exposure by leveraging engineering insights, modeling, and financial analysis to determine where risk should be retained, mitigated, or transferred.
Contracts play a pivotal role in defining data center risk. Lease agreements, service-level commitments, and financing terms allocate exposure among stakeholders, particularly when delays or performance issues arise. Insurance is typically structured alongside engineering design, contract negotiation, and capital planning—rather than applied in isolation.
Early-stage decisions are critical. Site selection, energy strategy, procurement structures, and contractual terms often set the foundation for risk allocation, and once made, they can be difficult and costly to change. Engaging risk and advisory expertise early can help align contracts, coverage, and design with real-world constraints.
