Data center risk across the lifecycle

Data center risk changes at every stage of the asset’s lifecycle

And risk management strategies and insurance solutions geared towards one stage may need to be adapted to provide adequate protection for the next.

A data center does not carry the same risk from one stage of its life to the next. The exposure associated with a site during planning and construction differs from that of a data center once it is live. And when the asset is retooled, migrated, or decommissioned, the risk changes again.

As those pressures shift, the contracts, coverage, and assumptions that fit one stage of the lifecycle may no longer fit the next stage. And this is where gaps can begin to form.

Whether you are planning a site, operating a live facility, retooling for higher-density demand, or managing a multi-site portfolio, the challenge is not simply identifying risk. It is understanding how that risk changes as the asset moves through its lifecycle.

This page is designed to provide you with a full-lifecycle view of how data center risk evolves, allowing you to see beyond the stage you are in and helping you take preemptive decisions to mitigate and transfer risks effectively throughout the lifecycle of your data center.

How risk changes across a data center’s lifecycle

Each stage of a data center’s lifecycle — from the planning and construction phase, through operations, and during upgrading and retooling projects — brings a different set of pressures.

Lifecycle stage	Dominant risks	Key considerations
Planning and construction	• Site-selection • Delay in startup • Contractual agreements • Construction exposure	Risk starts before the ground is broken. Site choice, power procurement, labor access, catastrophe exposure, financing, and contract structure can all influence whether a project remains viable, insurable, and on schedule.
Operational	• Downtime risk • Service level agreements • Revenue exposures • Cross-portfolio interdependencies	Even highly resilient sites can carry significant financial exposure. As uptime obligations scale across a portfolio, disruption can affect revenue, client commitments, and capital decisions well beyond one facility.
Upgrade and retool	• Transition risks • Continuity challenges • Business interruption exposures	Upgrades often change power, cooling, equipment concentration, and operating assumptions at once. Transition risk, phased works, contractor overlap, and outdated coverage assumptions can all create gaps if not addressed early.

Planning and construction: Addressing the risk profile from the outset

Some of the most consequential decisions in a data center’s lifecycle are made well before excavations start. Selecting a site for a data center is not simply a land decision. It shapes access to power and water, the availability of needed skilled labor, connectivity, exposure to natural catastrophes, insurability, and long-term operating resilience. Once a site is chosen and contracts have been signed, many of those factors become difficult — and often expensive — to resolve.

At the same time, skyrocketing AI demand and competition for capacity are increasing the pressure to move quickly and compressing construction timelines. Owners and developers often try to secure land, power, contractors, equipment, and financing based on delivery schedules that are far more aggressive than traditional construction insurance programs were designed to support.

Contract structure also matters. Construction agreements, power arrangements, tenant commitments, and financing documents can lock in delivery expectations and allocate risk long before a facility enters its operational stage. A misstep at this stage can translate into financial challenges for years to come.

The planning and build phase is also where data center projects increasingly face overlapping risks, including supply shortages, labor scarcity, and complexities related to behind-the-meter power development. These interconnected challenges can create a more complex risk landscape that could delay or even derail the project.

Top issues to consider during planning and construction

Whether the site is buildable, insurable, and financeable.
Whether site-specific catastrophe or infrastructure constraints have been assessed early.
Whether delivery obligations are aligned across all contracts.
Whether construction and power assumptions reflect time-to-market realities.

Operations: Managing uptime, revenue, and portfolio exposure

Once a site is live, the risk profile changes. At this stage, the focus often shifts to uptime, resilience, revenue continuity, and contractual performance.

Strong engineering and operational discipline remain essential. But while resilience-focused measures can reduce the likelihood of a disruption, they do not eliminate it.

And risks often compound. A power or cooling issue, an equipment failure, or a technology disruption may begin as an operational event. But in a live environment with strict uptime commitments, a single risk can quickly escalate into a revenue concern, a contractual challenge, or a reputational issue.

This reality becomes more complex when a data center is part of a portfolio. Dependencies across utilities, suppliers, contracts, and tenants can create interdependency and aggregation issues that a single-site view may miss. An issue that starts at one site may snowball into challenges for other parts of the portfolio.

Effectively addressing operational risk requires more than keeping one site running well. It requires understanding how assets, revenue, and contractual exposures interact while the facility is live and designing an insurance program that provides adequate protection for both an individual site and the entire portfolio as existing risks evolve and new ones emerge.

Operational risk is often broader than a single event

A power, cooling, or equipment failure may have consequences that extend to service level agreement exposures, revenue interruptions, tenant relationships, and contractual penalties.

Upgrade and retool: Adapting coverage to a changing asset

As data center workloads grow, many owners and operators are upgrading their cooling, power, and equipment within existing sites to keep pace with demand. In many cases, those changes take place while the site remains occupied and partially operational.

That transition period is often where exposures are more concentrated and where gaps in coverage can begin to emerge. This is mainly because the facility sits between two states — it is no longer fully under construction, but also not fully operational. Existing insurance programs may reflect the profile of the legacy asset rather than the one being created. Contract structures may not take into account the phased handovers, sectional completion, or temporary systems that are often the reality of these projects. Equipment may be removed, transported, stored, decommissioned, or reinstalled while contractual uptime expectations remain in place.

The transition itself becomes an exposure in its own merit.

This means that a retrofit, migration, decommissioning, or relocation project needs to be evaluated not solely as a technical exercise, but as a shift in the asset’s overall risk that may have operational, contractual, and financial implications. And insurance programs need to be reviewed to determine whether they effectively reflect the shifting risks.

Common pressure points during an upgrade and retool exercise

Phased works while part of the site remains operational
Partial handover, sectional completion, or partial occupancy
Increasing asset values and equipment concentration
Temporary power or cooling arrangements
Equipment in transit, storage, or reinstallation
Contractor and third-party liability overlap

Risk scales with your footprint

A single site, a hyperscale campus, and an enterprise estate spread across multiple facilities do not carry risk in the same way.

A single-site data center may carry concentrated exposure limited to one location. A hyperscale campus may combine very large asset values, major power dependency, tight uptime expectations, and significant contract exposure — all of which are concentrated in one place.

An enterprise data center estate spread across multiple sites introduces another layer: aggregation. Risks can build across geographies, contracts, suppliers, and operating dependencies, even where each individual site appears manageable on its own.

Taking a single-site view may not allow you to effectively identify and address risks before they become bigger challenges across the portfolio. This narrow approach may mask the consequences that a utility issue, supplier disruption, cyber event, or outage in one location may have on other assets.

This reality underscores the importance of going beyond a single-site view to identify and address an exposure before it can cascade across sites, contracts, and revenue streams. The larger and more interconnected the footprint, the more important it becomes to understand portfolio-level interdependency rather than treating each asset in isolation.

This is also where a lifecycle view of data center risks becomes especially valuable, helping you to see where exposure is concentrated, where assumptions no longer match reality, and where risk may be building silently across the portfolio.

How Marsh helps you manage risk across the data center lifecycle

Data center risk rarely sits neatly within one insurance line or one moment in time. It evolves throughout the lifecycle of the asset. Addressing risk effectively requires understanding the entire lifecycle of a data center, identifying interconnected exposures and risk aggregations, and taking a holistic approach to address them.

The team of specialists within Marsh’s Global Digital Infrastructure Practice has the deep industry experience and insurance knowledge to help owners, developers, operators, and investors address risks as they evolve and emerge. Marsh’s ARC framework, which focuses on assets, revenue, and contracts, helps you coordinate insurance and risk mitigation strategies across the changing asset lifecycle.

Marsh helps data center owners, operators, developers, and investors understand where risk sits at each stage of the lifecycle and where protection may no longer reflect the asset’s current reality.

That can include identifying stage-specific gaps, reviewing how contract structure and coverage interact, assessing how risk builds across a campus or portfolio, and helping you navigate the evolving exposures that come with planning, operations, and retooling.

What supports that work is the breadth of expertise — including insurance and reinsurance, capital solutions, people risk, and strategy advisory — across our business and deep digital infrastructure experience within our dedicated team. Together, we help you take a more connected view of a lifecycle that is often managed in pieces.

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