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Ensuring Resilience: The Role of Insurance in Data Centre Construction

The article highlights the vital role of comprehensive insurance in managing risks and ensuring stakeholder confidence in complex data centre construction projects.

23/06/2025 · 5 minute read

Building Resilience in Construction: The Importance of Comprehensive Insurance for Data Centres

Building data centres are inherently complex projects, because of their ultra-high-tech requirements and the exacting standards set by discerning tech clients.

They involve intricate planning and coordination among multiple stakeholders, including contractors, lenders and customers. The contractual negotiations can be complicated and arduous.

The rolling schedule of sectional handovers creates risks of potential disputes, liabilities and increased costs that need to be carefully managed, to avoid the developer facing a financial precipice.

Insurance is integral to each of these contracts and can be the deciding factor in persuading the stakeholders to sign on the dotted line. It offers each party peace of mind, so it’s important the developer has a comprehensive and seamless insurance programme in place from the project’s inception that strikes the ideal balance between risk transfer and mitigation to protect the developer against risks that could endanger the project’s – and their own future.

Sectional completions

The insatiable desire for more processing power means data centres need to be up and running as quickly as possible. Customers will often expect data halls to be operational long before the entire facility is complete, meaning building work will still be underway in other parts of the facility. That makes financial sense for the developer, allowing it to start earning a return on its considerable investment. But it also creates a huge potential liability if, once they’re handed over, those data halls, or the servers within them, are damaged by builders completing other parts of the data centre.

The main contractor will worry enough about what it might have to pay if its workers damage the building itself, let alone if they knocked the data centre out of action, interrupting the customer’s power and ability to transmit data.  So, it will want its exposure capped to any accidental damage by its workers.

But what limits should the developer agree to and how much third-party liability insurance should it have to protect from such an incident? If those are not set correctly, either the developer or the main contractor could be left with enormous liabilities, creating a messy and time-consuming dispute, creating a messy and time-consuming dispute, or a huge financial hit that fundamentally impacts the business operations of one of the entities.

Future-proofing the project

There will be lots of unknowns at the project’s start that pose big challenges for both developers and stakeholders. Timelines, costs, and resource availability may be unclear, making it crucial for developers to adopt a proactive approach to risk management and insurance.

The building work will be done in phases, each of which will have its own contractors: one for the substation, for example, another for the data centre, as well as possibly another completing the fit-out. All will work closely on the same site at the same time, all potentially in close proximity to the customer and its equipment. What happens if one damages the works of another? Agreeing a ‘hold harmless’ environment – where each contractor agrees to protect each other for liability or loss – can be difficult, but the data centre owner can help iron out any potential conflicts through a well-considered insurance approach.

A developer may not have an agreement fully finalised with a customer when building work starts. It could be working under a letter of intent, or the building might only be partially let, with the developer hoping to sign up another customer while the data centre is going up. Customer contracts can be onerous, particularly regarding their termination rights, so it’s important when it is looking for insurance, that the developer shares information with insurers on their proposed tenancy model, even if the contracts haven’t been signed. 

Navigating Financial Risks in Data Centre Development

Lenders are keen to finance more data centre projects, but to protect their investment they will expect a developer to mitigate a wide range of risks, from disputes over the property’s title, to legal, regulatory and political changes as well as the effect of inflation and supply chain problems on the project’s eventual cost.

Insurance will be a small part of the agreement a developer makes with its capital providers, but it will have an outsize impact on closing the deal. Some of the risks raised by the lenders may not have formed part of a developer’s planning when it began the project, particularly if it self-funded the initial construction phases. So, unless it has comprehensive insurance in place from the outset, it could be left scrambling to find the protection its lenders require to finance the project’s completion on time.

Some data centre projects, are now so big they have outgrown the amount of risk capital available in the insurance market capacity. – This causes developers a challenge with their lenders, who want insurance for the project’s full contract value.  But a trusted advisor can help a developer navigate these challenges, through maximising the available insurance capacity, negotiating with lenders’ advisors and by providing estimated loss assessments that will support the developer’s cause.

There is no one-size-fits-all insurance solution for data centres. Each project is different, because of the unique demands of the customer, contractors and lenders.  So, it’s important a developer brings an insurance broker onboard early in the contract negotiations and use it as a trusted advisor to offer support on the insurance needs created by these agreements.

Our people

Kate Fairhead

Kate Fairhead

Head of Mass Timber, Construction, Marsh Specialty, United Kingdom

  • United Kingdom

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Esmee Mitchell

Vice President, Construction, Marsh UK

  • United Kingdom

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