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Digital EditionData Center Building Boom Creates Insurance and Risk Management Complexities
The global data center industry is experiencing unprecedented growth driven by artificial intelligence and cloud computing demands, with close to $7 trillion projected to be spent on construction data centers by 2030, according to Allianz Commercial research.
“Data centers are particularly hot and rapidly growing,” said Darren Tasker, head of Construction, Americas, at Allianz Commercial. “We’re seeing significant-sized projects, from a billion dollars to those in the realms of $20 billion. This breakneck buildout is fueling a rise in related infrastructure projects, particularly power plants, needed to fuel them.”
Nearly $3 trillion will be spent globally on data centers by 2029, according to Morgan Stanley, with McKinsey estimating capital outlays of close to $7 trillion by 2030, the report said.
The Accelerating Infrastructure Expansion
Technology giants are leading this construction surge. Amazon Web Services, Microsoft, and Google Cloud accounted for 63% of global cloud services revenue in the second quarter of 2025, and these major providers—alongside China’s hyperscalers, or large cloud providers—invested approximately $210 billion in AI-related data center capital expenditures during 2024, the report said. Looking ahead, the investment momentum continues with Amazon planning around $100 billion for 2025, Alphabet approximately $75 billion, and Meta around $65 billion, with most funding directed toward AI infrastructure development.
This buildout is spreading globally, Allianz Commercial said. The U.S. remains the dominant market, with more than $74 billion in construction investment in 2024. Greater Beijing alone accounts for approximately 10% of global hyperscale capacity, with installed computing load projected to double to more than 8 gigawatts by 2030.
Europe, traditionally lagging behind in AI infrastructure investment, is experiencing a 43% annual increase in pipeline activity, with London and Dublin leading the regional expansion. In the Middle East, Saudi Arabia’s Public Investment Fund is launching Humain, an AI infrastructure initiative planning to deploy hundreds of thousands of graphics processing units over five years.
Multiple Risks Threatening Construction and Operations
Data center development faces substantial complications that extend far beyond traditional construction challenges, according to Allianz Commercial.
“The bigger data centers have a huge footprint. The scale of a $20 billion+ facility can involve tens of thousands of workers on site at peak times, with significant equipment and building supplies moving in and out,” said Chris Fancher, U.S. head of Construction Property at Allianz Commercial. “Timings can be tight. This requires expert coordination, as any missteps or faulty workmanship can lead to potential losses or costly delays.”
Power demands for these new facilities also represent a critical constraint, with global electricity consumption from data centers expected to more than double by 2030 to approximately 945 terawatt-hours. Aging electrical infrastructure and lengthy permitting processes are delaying grid connections, forcing developers to invest in behind-the-meter power solutions including solar, wind, gas turbines, and nuclear options.
Supply chain pressures are intensifying as well, the report noted. Equipment procurement lead times have extended considerably, with transformer delivery timelines now exceeding one year. Graphics processing units essential for AI applications face similar constraints, compounded by geopolitical tensions affecting access to advanced semiconductors and critical minerals. Labor shortages and skilled worker competition further compress project timescales on increasingly complex facilities.
Geographic and environmental vulnerabilities add another layer of risk, according to the report. Remote data center locations face heightened exposure to severe storms and wildfires, while concentrated hubs such as Northern Virginia, London, and Frankfurt create infrastructure vulnerability to localized disasters. Lithium-ion battery systems used in server equipment present fire hazards, as demonstrated by recent incidents in South Korea.
Community opposition and regulations are mounting across regions, Allianz Commercial said. Data center water consumption concerns have prompted local authorities and environmental organizations to challenge projects, while energy affordability fears are escalating in areas near major data center developments, with some wholesale electricity costs reported up to 267% higher near facilities, the report said.
The European Union’s Energy Efficiency Directive mandates performance reporting beginning in 2024 and energy management system implementation by 2026. Singapore introduced its Green Data Centre Roadmap in 2024, while China targets reducing power usage effectiveness and increasing renewable energy utilization. The United States employs a fragmented regulatory approach, with state and local regulations focusing on environmental impacts and water resources.
Risk Management and Insurance Requirements
The technical complexity of modern data centers demands specialized insurance solutions, according to Allianz Commercial. Developers require project-specific policies covering casualty risks, professional liability, and builder’s risk during construction, alongside specialized coverage for property damage, business interruption, and environmental liabilities related to on-site power generation.
Resilience strategies must prioritize site design with diverse power supplies routed from different substations and self-generation capacity. More sophisticated operators are increasingly implementing “mirroring” strategies, replicating facilities with identical data and functionality in real time to address heightened regulatory and reputational risks.
“Currently, there are no clear signs the growth in data centers has reached its peak, but there could be a check on the industry’s upward trajectory,” Tasker said. “Future demand for AI is difficult to gauge, due to rapid technological advances and various barriers to widescale roll-out. This has led some commentators to voice fears about a bubble, over-investment, and the prospect of stranded assets.”
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