Expertise

Data center insurance and risk management

Risk management and insurance support for data center owners and operators.

Managing data center risk through a comprehensive strategy

AI-driven demand is reshaping both the economics and the risk profile of data centers. Owners, developers, and operators are building larger campuses and retrofitting existing ones, committing more capital earlier, and managing tighter uptime expectations than the market was designed for even a few years ago. All this is taking place at an unprecedented pace to keep up with intense demand.

At the same time, exposures are becoming more concentrated, with more value sitting under one roof, more dependencies across power, cooling, fiber, and suppliers, and the potential for more severe financial consequences when construction or operations fall behind.

For data center owners, developers, and operators, managing this confluence of risks can start with understanding where exposure sits across the asset, the operations, and the contracts that support it. The focus may then turn to reducing exposures through design, planning, and governance. Finally, a tailored insurance program can help organizations to further protect their assets, revenue, and obligations that remain exposed.

A robust data center risk management strategy can enable the identification, reduction, and governance of operational, physical, cyber, contractual, and financial exposures that can affect a data center’s performance.

A comprehensive data center insurance program can transfer these residual risks in an effort to help protect assets, revenue, and obligations when a loss occurs.

Marsh’s team of specialists combines decades of direct industry experience with deep insurance expertise, enabling us to understand your business quickly, help identify potential effective risk management strategies, and help build insurance programs that are targeted to your specific issues. Our team provides risk management and insurance placement assistance with the goal of helping you build a more resilient asset.

To learn more about how to better assess data center exposures, right-size coverage, and strengthen resilience from construction through operations, fill out the form below to speak with a Marsh data center specialist.

Understanding your full exposure map

Data center risks extend well beyond the walls of the facility. Significant losses can arise even without physical damage as pressure on power, contractors, suppliers, or other dependencies can quickly impact construction timelines, costs, operations, and revenue.

A holistic risk management and transfer program requires first understanding that network of dependencies and how disruption in any one area can cascade across the project.

Construction risk. Contractor shortages, workmanship defects, design changes, late deliveries, concurrent builds, and on-site or nearby catastrophic events can delay completion, potentially leading to missed deadlines and fines.
Power procurement challenges. Interconnection queues, grid upgrades, and supply chain backlogs can delay access to reliable, tenant-usable megawatts while power purchase agreements (PPAs) may require substantial upfront capital and create a mismatch with shorter tenant horizons. Behind-the-meter generation can accelerate delivery but shifts permitting, operational, and maintenance risk to the owner and removes the grid as a fallback during an outage.
Physical asset damage. Damage to buildings, data halls, electrical systems, cooling infrastructure, and high-value equipment can interrupt operations and delay revenue, with asset concentration potentially increasing the severity of a single event.
Uptime risk. Strict service level agreements (SLAs) increasingly demand extremely high — often “five nines” — uptime and impose severe financial penalties for downtime or delayed startup.
Cyber risk. Cyber events can disrupt operational technology, building controls, power management, cooling systems, and tenant services, creating resilience, contractual, financial, and operational consequences.

Business interruption and contingent business interruption. A loss at your site — or at a key supplier, utility, carrier, or contractor — can delay startup, disrupt operations, and reduce revenue, with the cost of a delay rising as timelines compress and service obligations tighten.
Supply chain risk. Delivery delays for critical components or equipment can slow development or upgrades. These exposures may be hidden deep within the supply chain, underscoring the importance of identifying downstream suppliers.
Financial challenges. Cost overruns, unexpected delay penalties, cash flow squeezes, and restrictive lender covenants can impact a project’s financial health and threaten overall viability.
Specialized labor shortages. Limited skilled labor availability can slow construction, complicate retrofits, and increase operational risks, particularly as mega campuses expand into thinner labor markets.
Third-party liability. Bodily injury, property damage, and financial loss claims can arise during construction and operations, especially where multiple parties and handoffs are involved.
Environmental risk. Pollution, fuel storage, backup generation, battery systems, and on-site power can create environmental liabilities, particularly as behind-the-meter power generation expands.

Modern campuses concentrate high-value assets in one location, meaning that a single event or dependency failure can trigger multiple losses simultaneously.

Closing the gaps in conventional coverage

Off-the-shelf property, casualty, and technology errors and omissions policies were not built for the scale, density, and aggregation of modern data centers. While they remain important building blocks, they can leave material gaps. Further, traditional solutions like builder's risk, owner- and contractor-controlled insurance programs (OCIPs and CCIPs) are being stretched well beyond their original design assumptions, especially for mega campuses, phased handovers, and contracts with strict uptime obligations. A cooling failure, controls issue, or supplier disruption can become a business problem long before it becomes a conventional insurance claim, and values can accumulate rapidly across highly sensitive equipment.

Standard policy assumption	Data center reality
Assets can be valued and insured in the same way as other commercial properties	Extensive asset concentration and highly sensitive equipment means that lost values can escalate quickly
Operations begin once construction ends	Many projects transition in phases, potentially creating coverage gaps
Property damage is the main concern	Delayed startup, revenue loss, SLA obligations, and supply chain disruption can be equally material
One event causes one type of loss	A single incident can trigger property, delay, contractual, and reputational consequences
Standard exclusions and sub-limits are manageable	Restrictive language can create meaningful protection gaps

Designing coverage for these realities takes more than insurance knowledge. It takes the industry experience to spot the vulnerabilities and coverage gaps in the first place — which is why Marsh's digital infrastructure team pairs insurance expertise with veterans from energy, construction, and technical disciplines.

What a data center risk assessment should cover

A credible data center risk assessment should do more than list hazards. It should create a practical framework for mitigation, financing, and transfer.

A robust assessment typically covers:

Exposure identification across the full risk landscape. Review physical, equipment, cyber, business interruption, liability, environmental, and supply chain exposures.
Quantification of potential losses. Estimate potential loss severity, including the financial effect of delayed startup, and supply chain disruptions.
Review of contracts and service level agreements. Examine how risk is allocated across leases, construction agreements, power arrangements, and service commitments.
Supply chain mapping. Identify single points of failure, long-lead equipment, critical vendors, and multi-tier dependencies.
Site selection analysis. Evaluate natural catastrophe, water, power, cooling, labor, fiber, and buildability considerations that can affect insurability and continuity.
Insurance program design. Translate findings into a program structure, limit strategy, and product mix aligned with actual exposure.

This same discipline applies to upgrades, retrofits, and migration planning. Assessment should account for live-environment work, operational continuity, contractor controls, and changing asset values. Contact us to learn how to better assess data center exposures, right-size coverage, and strengthen resilience from construction through operations.

Building resilience into data center projects

In order to address the broad, interconnected risks facing data centers, owners, developers, and operators should consider a lifecycle approach that pairs clear analysis with pragmatic capital tools.

One of the most important questions for owners and developers is also one of the hardest to answer: How much coverage do I need? Under-insuring can expose stakeholders to significant financial losses, while over-insuring can strain already-tight budgets.

Detailed loss studies, including probable maximum loss (PML) analysis, that can help quantify exposures and right-size coverage based on estimates of the largest reasonably foreseeable loss for defined scenarios.

For many owners, developers, operators, investors, and lenders, this analysis helps turn a broad exposure discussion into a defensible coverage strategy. It can inform builder’s risk limits, delay-in-startup exposure, and first-loss structures based on the project’s design, location, timeline, and accumulation profile.

A specialist property risk consulting approach goes beyond a top-line valuation, accounting for:

Site-specific natural catastrophe and engineering conditions
Construction sequencing and cost accumulation over time
Asset values across core infrastructure and sensitive equipment
Repair timelines, expediting costs, and schedule impacts
Delay in startup and downstream revenue implications

Detailed loss studies can also support financing by demonstrating that coverage decisions are grounded in analysis rather than guesswork.

Marsh’s dedicated risk consulting team helps translate technical exposures into clear information in an effort to support more defensible coverage decisions.

The handoff from construction to operations can be one of the most exposed moments in the data center lifecycle.

Many projects do not move from “under construction” to “fully operational” in a single step. They move through phased handovers, with one hall energized while another remains under construction, or one system commissioned while another is still being installed.

If coverage is not designed around this delivery model, losses can fall between conventional policy structures.

Marsh’s Nimbus can provide lifecycle-spanning construction protection through a single policy structure designed to follow the asset from build into operations, including delay-in-startup coverage and the transition from builder’s risk to operational cover. It helps streamline coverage for every stage of the project lifecycle.

Long after construction is complete, data centers must remain fully operational while undergoing continual upgrades to meet rising tenant demand. To do this effectively, owners/operators must align three interdependent priorities related to their assets, revenue, and contracts — an integrated lifecycle that Marsh defines as ARC:

Assets, including data halls, power systems, and cooling infrastructure, need to be managed as a continuous lifecycle, not a one-time investment. Hardware can become obsolete or wear out quickly, making timely refreshes and infrastructure upgrades critical to performance and uptime.
Revenue planning needs to keep pace with the costs of operating, upgrading, and expanding the facility. As tenant contracts, market demand, and capital needs shift, the revenue strategy should support both near-term performance and longer-term investment.
Contracts often outlast the technology inside the facility, making long-term contract planning essential, so owners can manage fixed commitments while adapting the asset, service model, and investment strategy over time.

These overlapping timelines create complexity. An equipment concern becomes a revenue issue if it affects service. A revenue issue becomes a contract challenge if it triggers penalties. A contract challenge becomes an insurance problem if the policy language does not align to the obligation.

Marsh’s ARC approach connects these pillars to help owners/operators adopt a practical governance approach that aligns investment decisions, tenant economics, and contractual commitments, enabling facilities to remain resilient amid shifting external demands.

Underwriters increasingly evaluate data center risk through a wider operational lens. Premiums are shaped by several factors, including:

Loss history
Site and natural catastrophe exposure
Construction quality and materials
Fire detection and suppression design
Redundancy and resiliency measures
Valuation accuracy
Asset concentration and aggregation

The quality of the underwriting submission matters, as does the analysis behind it. A clear exposure narrative, supported by risk engineering and quantified loss work, can help underwriters distinguish between a generic property schedule and a well-managed digital infrastructure risk.

Liquidity also matters.

Surety bonds can help satisfy contractual security requirements without tying up capital in letters of credit.
Premium financing can spread large premium payments over time and better align them with project cash flows.

For data center owners and developers, those tools can improve capital efficiency and preserve flexibility while still supporting lender and counterparty requirements.

Building a resilient data center requires more than market access. It can call for a risk and insurance advisor that understands how operational, contractual, and financial exposures interact across the data center lifecycle and can help align risk management and insurance strategy to both current and emerging risks.

Lease terms, SLAs, vendor agreements, and pass-through provisions can create significant exposures for data centers, especially where contracts include tight uptime guarantees, strict power and commissioning delivery windows, and steep liquidated-damage clauses. If these obligations are not allocated and secured correctly, owners and developers can face significant financial liability.

Contract advisory can translate operational requirements into clear commercial terms, including:

Defining realistic handover milestones and acceptance tests
Apportioning availability and performance risk to the parties best able to control it
Embedding appropriate security and recovery mechanics so obligations are enforceable and insurable
Aligning contract drafting with insurance and financing needs

Marsh’s team of contract specialists work with owners and developers throughout the lifecycle of a data center help determine whether contracts provide protection.

Power can be the primary constraint for data centers. Utilities and grid operators often require guarantees to protect capital investment in infrastructure upgrades and interconnection works.

Letters of credit (LoCs) remain common, but they can require substantial collateral and reduce financial flexibility.

Surety guarantees can provide an alternative by supporting interconnection obligations, PPA payment commitments, and certain power delivery obligations, often without LOCs’ collateral requirements. This can help preserve liquidity for other investments.

Marsh’s surety specialists work closely with data center owners and developers as well as utilities to help structure power-generation and interconnection bonds — and where needed, bank-fronted solutions — that align with the requirements of underlying PPAs.

FAQs

A properly designed data center insurance program can provide tailored coverage for a multitude of potential exposures, including property damage, equipment breakdown, business interruption, delay in startup, cyber exposures, general liability, and selected contractual risks.

A comprehensive data center risk management strategy enables owners and operators to better identify and quantify exposures. This information may help enable the reduction of exposures that can be mitigated through design and governance, and transferring some of what remains through insurance and related risk-financing tools.

The main risks include asset concentration, equipment breakdown, cyber disruption, business interruption, supply chain delays, environmental exposures, contractual penalties, and the build-to-operations transition.

Standard property insurance was not designed for AI-era density, phased handovers, extreme aggregation, or the combination of physical, contractual, and revenue exposures seen in large data center campuses. A tailored insurance program can take into consideration the specific risks of an asset and provides targeted coverage for these exposures.

A strong assessment should cover exposure mapping, probable maximum loss (PML), and delay in startup (DSU) analysis, contract and service level agreement review, supply chain mapping, site resiliency considerations, and a clear path from findings to coverage design.

Detailed loss studies, such as Marsh’s probable maximum loss (PML) analysis, estimate realistic loss scenarios. This information can be used to align limits to the site’s actual exposure profile.

Delay in startup coverage helps protect against financial loss when insured physical damage delays project completion and pushes back the start of revenue generation.

Ideally, at site selection. Early analysis can affect design, insurability, financeability, contract strategy, and long-term operating resilience.

Alongside insurance, tools such as surety bonds and premium financing can help preserve working capital, reduce reliance on letters of credit, and support financing objectives.

Why Marsh?

Marsh works with 75% of the top 25 data center companies and 10 of the largest global technology companies by revenue. Our team brings close to 100 years of combined digital infrastructure experience. We also bring access to specialized solutions, including Nimbus, and capital-focused strategies that have helped unlock hundreds of millions of dollars in liquidity.

Our digital infrastructure team combines insurance expertise with industry knowledge shaped by people who understand how data centers are developed, contracted, powered, and operated. That includes experience drawn from the sector itself, helping bridge the gap between operational reality and insurer expectations.

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Build a more resilient data center risk strategy

Modern data centers face a wide range of interconnected risks. From construction and power to supply chain, cyber, contractual, and operational exposures, a single issue can affect timelines, revenue, resilience, and long-term asset performance.

Managing those exposures requires more than a standard insurance placement. Specialist guidance can help you map your exposures, pressure-test your current program, and identify strategies to strengthen protection across the data center lifecycle.

Speak with a Marsh data center specialist to:

Assess exposures across construction, operations, and transition points
Identify potential gaps in conventional coverage
Evaluate limits, structure, and risk financing options more effectively
Strengthen resilience across operational, contractual, and financial risks

Fill out the form to speak with a Marsh data center specialist.

Data center insurance and risk management

Managing data center risk through a comprehensive strategy

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