Article

Data centres as a new asset class: Potential implications for insurance and risk management

This article explores data centres as a new asset class, their unique risks, and the implications for insurance and risk management strategies.

The data centres now spreading worldwide are increasingly being recognised by banks, investors, and the insurance industry as a distinct and significant asset class. Their hybrid nature — combining elements of real estate, power generation and infrastructure, and advanced technology — gives rise to unique risks and considerations underpinning data centre investment and insurance strategies, while supporting the idea of a new asset class. Contact our experts to discuss how they can help support your business's future development.

For context, the most expensive data centre project currently underway is estimated at US$100 billion, starkly contrasting with the US$1.4 billion cost of constructing the world’s tallest building, the Burj Khalifa. This comparison highlights the size, sophistication, and operational complexity of data centres that distinguishes them from any other asset class.

A comprehensive understanding of data centre-specific issues, along with the range of risk management options available, is essential for accurately assessing their risk profile and determining appropriate insurance requirements for this emerging asset class.

What sets data centres apart from other asset classes?

Data centres are typically considered a real estate asset due to their physical infrastructure (buildings and land).

However, data centres also function as vital infrastructure, providing essential digital connectivity and services.

As data centres are elevated to a new level of national and corporate strategic importance, as well as investment appeal, several factors are also contributing to the recognition of data centres as a distinct asset class:

Growing demand: The increase in data generation, cloud services, and digital transformation initiatives has created sustained global demand for data centre capacity. As digital infrastructure becomes integral to business operations and daily life, data centres are increasingly viewed as critical national infrastructure with strong growth prospects.
Stable revenue streams: Data centres often generate long-term, lease-based income with high occupancy rates, making them attractive to institutional investors. Underscoring this point, data centre occupancy is projected to rise from 85% in 2023 to over 95% by 2026.
Specialised infrastructure: The need for specialised design, security, and energy management differentiates data centres from traditional real estate assets.
Complex ecosystem: A data centre’s network typically involves many technologies, businesses, and services that support its development, operation, and use. This intricate ecosystem often results in multiple risk owners, for example, the property owner may be responsible for the building itself, while tenants or service providers own and manage the facility’s technological contents.
Market maturity: The sector has seen the emergence of dedicated investment funds, REITs focused on data centres, and increased participation from pension funds, sovereign wealth funds, and other institutional investors, further establishing their status as a distinct asset class.

AI and non-AI data centre considerations

AI-focused data centres are typically more complex, capital-intensive, and specialised, which influences their operational strategies, costs, and valuation models compared to traditional data centres. Key differences include higher rack densities, advanced cooling solutions, optimised network architectures, and enhanced security measures.

Insurance and risk considerations

The global demand for computing power is projected to push data centre investments toward nearly US$7 trillion by 2030. Accompanied by increasing size, sophistication, and power requirements, the rising asset value of data centres will likely necessitate higher insurance limits and extended capacity to manage associated risks.

In addition, there is a growing need for more specialised coverage that reflects different leasing arrangements, service-level guarantees, emerging technologies, and sustainability initiatives.

Understanding the unique risk profile of data centres is therefore essential for developing comprehensive, multi-layered coverage strategies that effectively address the interconnected risks. These risks may include:

Physical property infrastructure risks: Location-specific natural disasters such as earthquakes, floods, and hurricanes; property damage from fire, water, vandalism, and accidental damage; and high valuation and replacement costs due to specialised infrastructure.
Physical cyber risks: Hardware failures, cyberattacks, or software issues that cause outages, data loss, or security breaches and lead to operational disruptions and legal liabilities; the pace of technological change that outdates equipment quickly (such as liquid cooling); and changes in asset valuation and replacement strategies.
Energy risks: Dependence on reliable power and cooling systems; network connectivity disruptions; and electricity supply fluctuations impacting operational stability.

Risk management strategies for a new, modern asset class

The physical and digital asset risk profile of data centres is a complex blend of real estate, energy, infrastructure, and advanced technology exposures.

From a risk and insurance perspective, this necessitates comprehensive, multi-layered coverage strategies, detailed risk assessments, and proactive resilience measures. Effectively managing these diverse and interconnected risks is important to safeguard this rapidly evolving and strategically vital asset class.

Amid the surge in global data centre projects, Marsh is pleased to announce the Marsh Data Centre Insurance and Risk Management Services. We support a wide range of sectors and business models involved in data centres, including diverse operating models and industries that heavily invest in this infrastructure, such as real estate, technology, and financial services organisations.

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This publication is not intended to be taken as advice regarding any individual situation and should not be relied upon as such. The information contained herein is based on sources we believe reliable, but we make no representation or warranty as to its accuracy. Marsh shall have no obligation to update this publication and shall have no liability to you or any other party arising out of this publication or any matter contained herein. Any statements concerning actuarial, tax, accounting, or legal matters are based solely on our experience as insurance brokers and risk consultants and are not to be relied upon as actuarial, accounting, tax, or legal advice, for which you should consult your own professional advisors. Any modelling, analytics, or projections are subject to inherent uncertainty, and any analysis could be materially affected if any underlying assumptions, conditions, information, or factors are inaccurate or incomplete or should change.

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Data centres as a new asset class: Potential implications for insurance and risk management