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The role of surety in the development and operation of data centres

In today’s rapidly evolving digital landscape, demand for data centres capable of powering and enabling global connectivity, complex processing, and storage tasks is surging.

20/10/2025 · 4 minute read

In today’s rapidly evolving digital landscape, demand for data centres capable of powering and enabling global connectivity, complex processing, and storage tasks is surging. Valued at US$242.7 billion today, the global data centre industry is set to more than double, to over US$584 billion by 2032.

However, while the demand for data centres is global and growing, building and operating them at scale is not without potential hurdles. One complex challenge is the capital-intensive nature of these projects. From securing prime land and high-voltage power to installing advanced cooling systems, backup power, sophisticated hardware, and robust security software, the costs can add up.

This is where surety guarantees (also called surety bonds) can be a game-changer. By offering financial protection and risk mitigation, surety guarantees assist data centre developers in navigating the complexities of data centre projects while offering a cost-effective alternative to bank guarantees and bank letters of credit.

What are surety guarantees and how can they help data centre developers?

Surety guarantees are instruments issued by an insurance company (“the surety”) on behalf of those supplying goods or services or who have an obligation to another party. A surety guarantee is issued in favour of a beneficiary — generally a customer, a counterparty, or a government authority. If the underlying obligations are not met, the surety will respond.

For data centre developers, surety guarantees can serve as a key tool for grid interconnection obligations and commercial contracts which ensure reliable power supply via power purchase agreements (PPAs).  Surety guarantees can be used to cover a data centre’s long-term payment obligations under PPAs and/or can cover the power provider’s obligations to supply power to the data centre.

Advantages for data centre stakeholders

Financial protection and greater flexibility

One of the primary benefits of surety guarantees for data centre developers is the financial protection they provide. Stakeholders often require financial security, and sureties help meet these requirements — often without requiring collateral or security.

The use of surety guarantees helps to keep bank lines free for other needs. This financial flexibility allows developers to allocate capital efficiently across other projects, such as equipment procurement and construction costs.

Enhanced credibility, project protection, and risk mitigation

Surety guarantees can demonstrate that prime contractors, subcontractors, and key equipment suppliers have undergone a rigorous third-party qualification process, judging them capable of fulfilling their contractual obligations.

In the event of default, performance guarantees issued by qualified insurers safeguard the project’s completion, minimising financial losses and preventing costly delays. This assurance can be especially important for data centres — capital-intensive and time-sensitive projects where delays can have significant operational and financial impacts. Lenders and financiers can have confidence knowing that the project and contractors have undergone thorough vetting and are fully bonded.

Support for interconnection and power delivery risks

Energy providers responsible for powering data centres must provide guarantees that cover interconnection obligations and the reliable delivery of power — whether to the grid, a utility, or directly to the data centre owner. As the offtaker, the data centre may also be required to provide payment security under the long-term PPA. Surety guarantees offer an efficient way to secure these supply and payment obligations, facilitating capital investment and providing a dependable energy supply for data centre operations.

Marsh can arrange for surety-backed bank guarantees or letters of credit (“bank fronted-solution” or “BFS”) when beneficiaries do not accept traditional surety guarantees. These alternatives provide a cost-effective option compared to traditional bank guarantees and letters of credit.

Support for various financial obligations

Surety guarantees can potentially address a wide range of financial requirements for data centre developers and others in the data-centre ecosystem, including:

  • Power purchase agreements
  • Interconnection agreements
  • Long-lead equipment purchases
  • Substation construction
  • Municipal site improvements
  • Lease agreements
  • Contractor performance security
  • Licences and permits

This broad applicability makes surety guarantees a versatile tool for managing the complex financial landscape of data centre projects.

Alternative to cash deposits and bank letters of credit

Surety guarantees offer an attractive alternative to cash deposits and bank letters of credit, which can reduce liquidity and tie up capital. This liquidity preservation can be key for data centre developers who need to maintain financial flexibility to respond to changing project demands and market conditions. Marsh works with highly-rated insurers who are committed to their surety offerings, which provide beneficiaries with greater peace of mind.

Using surety for data centres

Surety guarantees are unlocking new possibilities for data centres to meet the growing demand for sustainable digital infrastructure.

At Marsh, we can customise surety guarantee programmes to address the unique needs of data centre projects and assist with integrating surety into a suite of risk management and insurance solutions that seeks to optimise financial security and drive project success.

For more information on surety and to understand how it can help your organisation, please contact your Marsh representative.

Nick Broyles

U.S. Surety Leader

  • United States

Vincent Moy

International Surety Leader

  • United States

Philip Neighorn

Europe Surety Leader

  • United States

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