The rapid expansion of data centres powering the artificial-intelligence boom is creating significant opportunities for property-and-casualty insurers to develop new insurance products as demand grows for specialised coverage, according to a new report from AM Best.

The ratings agency said the proliferation of large-scale data centre projects is generating insurance needs that extend beyond traditional commercial property and liability policies, requiring insurers to innovate as developers invest billions of dollars in AI infrastructure.

In its report, Evolving data centre landscape requires insurer innovation, AM Best said the growing number of hyperscale data centres — massive facilities that support AI and cloud-computing operations — presents a range of emerging risks and coverage challenges.

“As data centre development and construction spreads, the required insurance coverage is evolving, as it is currently beyond what the traditional property/casualty industry has previously experienced,” said David Blades, associate director of industry research and analytics at AM Best.

Billions of dollars in private investment, and federal directives to fast-track certain projects are spurring the proliferation of data centres, the report states.

AM Best cites Data Centre Map, which has tracked the development in the US since 2007. As of May 21, there were 4,287 data centres in the US, with the two leading states Virginia (14.1 per cent of the US total) and Texas (10.7 per cent) accommodating nearly one quarter of them.

Business interruption coverage is expected to be among the most critical insurance products for data-centre operators.

AM Best noted that the scale and complexity of AI operations increase the potential for costly disruptions, particularly from power outages and equipment failures. A shutdown at a single facility could trigger significant revenue losses and affect multiple customers across interconnected networks.

The report highlights several areas where insurers may need to expand coverage offerings. Builders’ risk policies are increasingly important during the construction phase, with extensions such as delay-in-start-up and advance loss-of-profits coverage helping developers manage financial losses caused by project delays.

Commercial property coverage also faces new challenges. Data centres contain highly specialised servers, networking equipment, cooling systems and back-up power infrastructure that are expensive to repair or replace.

The concentration of valuable technology assets raises the potential severity of losses stemming from fire, natural catastrophes or system failures.

Beyond physical risks, insurers must also consider exposures related to energy and water consumption, labour shortages, electric-grid investments and cyber threats. Environmental liability claims could emerge if data centre operations are perceived to strain local power or water supplies.

The report notes: “By one estimate, a modern AI data centre can use as much power as approximately 100,000 homes. A study from the Lawrence Berkeley National Laboratory estimated that data centres could represent up to 12 per cent of all US electricity consumption by 2028.”

AM Best said the industry’s exposure may extend beyond underwriting. Given the substantial capital required to finance data centre construction, insurers could also face investment risks through private credit, private equity and other financing arrangements tied to the sector.

As AI adoption accelerates, the report suggests insurers that develop innovative coverage solutions will be well positioned to support one of the fastest-growing infrastructure sectors in the economy while capturing new business opportunities.