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Digital Infrastructure

The insatiable demand for digital infrastructure requires innovation, capital, and speed to market. Building and maintaining the capacity needed comes with challenges and risks that Marsh can help companies manage.

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The digitization and datafication of everything, AI and machine learning workloads, high-density computing requirements, and digital sovereignty are creating an insatiable demand for digital infrastructure. From data centers, cloud services, and communications networks, to power and enabling technologies, demand to expand this infrastructure is expected to remain high for at least the next 10 to 15 years.

Speed to market demands, capital and development challenges, power and sustainability concerns, regulatory oversight, and geopolitical priorities create substantial headwinds for the owners, operators, and developers of digital infrastructure

As it grows, the ecosystem faces many specific risks that could impact the lifecycle of digital infrastructure — from construction to operation — which are expected to become more complex and challenging.

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FAQ

  • Datacenters – Hyperscale, Enterprise, Colocation, Edge
  • Cloud & Hosting – Infrastructure or Platform as a Service, Managed Hosting
  • Communications – Fiber, Wireless, Towers, Small Cell, Satellite
  • Enabling Technologies – Hardware & Components, Network Equipment & Management, Network Security & Virtualization, Data Center Infrastructure
  • Power – Grid, Renewables, Emerging, Storage and Backup
  • Construction – Developers, Architects & Engineers, Contractors & Subcontractors
  • Customers, Investors, and Operational Service Providers

Design and construction challenges: Site selection, design, proactive risk control, and regulatory compliance are among the potential challenges that could impact the design and construction process. Oversights could result in missed deadlines, increased costs, and ongoing vulnerabilities, if not properly addressed.

Securing sufficient power and energy: Owners and developers must navigate the complexities of energy procurement and regulatory compliance. Further, while the transition to renewable energy sources may be required to adhere to sustainability goals, it could also lead to availability, reliability, and cost uncertainty challenges.

Counterparty risks: As dependence on data centers increases, the growing reliance on a handful of players that provide scarce graphics processing units (GPUs) and develop foundational AI models is likely to add another layer of complexity to the risk landscape.

Contractual liabilities: Digital infrastructure owners must negotiate complex service level agreements and power purchase agreements, ensuring that the contracts carefully delineate responsibilities and expectations. This requires a thorough understanding of the events that could lead to outages and ensuring that insurance is available — and not cost-prohibitive — to provide the coverage needed to enable business transactions.

Operational risks: Cybersecurity threats, natural disasters, and other challenges could disrupt operations. Once a data center is operational, organizations will need to ensure that this is properly maintained and secured and that disaster recovery processes are in place to mitigate and recover from unforeseen disruptors. Additionally, GPU reliance to scale AI could increase power-related failures unless proper cooling mechanisms and other mitigating factors are put in place.

Regulatory and compliance challenges: Data centers are subject to a myriad of regulations and compliance requirements that are often dependent on the location. Shifting regulations could introduce new risks, requiring organizations to stay abreast of developments to ensure their operations remain compliant and avoid penalties.

Financial risks: Data center construction is very capital-intensive, requiring organizations to carefully manage their budgets and financing arrangements to reduce the risks of cost overruns. Fluctuations in interest rates and market conditions may complicate financial planning.

  • Customized insurance solutions - From data center-specific property,  casualty, and cyber insurance coverages to specialized construction programs, surety, transactional risk, and performance guaranties, the needs of digital infrastructure companies are highly unique.
  • Risk assessment and loss control -  Risk engineering, enterprise risk management, and contractual risk management must reflect the complexities of the ecosystem and adapt to the continual introduction of new technologies, operating models, and risks.
  • Analytics and Project Management - Digital tools, risk analytics, and project management platforms are necessary to better understand and manage key risks, while also reducing costs and administrative burdens.
  • Tightly coordinated Expertise. Realtime expertise and solutions are needed at every phase of design, development, and operations. The speed of success, and the simultaneous need for flexibility, demands a thoughtful and structured approach to derisk innovation and enable growth.

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