Allianz sees data center boom reshaping infrastructure risk

SINGAPORE — Artificial intelligence is driving one of the largest infrastructure investment cycles in decades, with annual data center investment projected to double from around USD 500 billion in 2024 to more than USD 1 trillion as early as 2027, according to Allianz Commercial.

The rapid build-out is also turning data centers from specialized commercial real estate into critical infrastructure, raising public-interest concerns over electricity supply, climate resilience, construction capacity, service disruptions, and the cost of protecting facilities that increasingly underpin digital services and economic activity. The U.S. and China are expected to account for around 62% — more than 60% — of

The pressure on power systems is particularly significant because data centers require large, concentrated electricity loads. The International Energy Agency said data center electricity demand rose 17% in 2025, compared with 3% growth in global electricity demand, while warning that rapid expansion can require new

Allianz said the investment opportunity extends beyond server halls to electricity generation, grid infrastructure, cooling systems, networking, and semiconductors.

Although the U.S. and China will remain dominant, Allianz Research expects the next phase of data center investment to become increasingly global.

Germany, the United Kingdom, and Ireland remain major European markets, while Spain, Finland, and Denmark are expected to expand faster because power availability and permitting conditions can be more favorable.

Across Asia Pacific excluding China, installed capacity is projected to increase from around 9 gigawatts today to more than 28 gigawatts by 2030, with Malaysia expected to grow more than tenfold.

“AI is turning the latest generation of data centers from a specialist real estate asset into mission-critical infrastructure,” says Thomas Lillelund, CEO of Allianz Commercial.

“The scale of investment is extraordinary and, as these centers evolve beyond traditional data storage to high-performance compute demands, success will increasingly depend on resilience: access to power, reliable supply chains, robust construction controls, as well as climate-aware site selection and insurance programs that reflect the true accumulation risk. Indeed, comprehensive insurance cover has become a prerequisite for financing many large-scale AI infrastructure projects.”

The sector’s biggest constraints are increasingly physical rather than financial, as access to electricity, grid connections, permits, specialized equipment, and skilled workers becomes a determining factor in where projects can be built.

In the U.S. alone, the construction industry faces a shortage of around 439,000 skilled workers, while an

Climate resilience is also becoming central to project planning because around 79% of global data center capacity — almost 80% — is already located in areas exposed to heightened natural catastrophe risk.

About 54% of global data center capacity is exposed to chronic heat and drought stress.

Some of the fastest-growing AI infrastructure markets are also among the most climate-exposed, including Northern Virginia in the U.S., Johor in Malaysia, and Marseille, France.

Acute flood, wildfire, and wind exposure is highest in the Americas, affecting 86% of data center capacity.

Chronic heat and drought stress is greatest in Asia Pacific, where 89% of capacity is exposed.

The growing physical exposure means decisions on where data centers are placed can affect not only investors and insurers but also communities sharing electricity, water, transport, and other infrastructure with large facilities.

Allianz Trade separately reported in June that data centers consumed 814 billion liters of water in 2025 and could require 1.3 trillion to 1.8 trillion liters by 2030, underscoring the potential for infrastructure expansion

Insurance is evolving alongside the industry as data centers assume a more critical infrastructure role.

Construction costs for a single AI campus can exceed USD 20 billion, while insured values rise substantially

The global data center insurance market is projected to more than double from around USD 11 billion today to more than USD 24 billion by 2030 as capacity expands, insured values rise, and operations become

Insurance demand is expected to move beyond traditional property protection toward integrated coverage involving construction, engineering, property, business interruption, cyber, and liability risks.

Allianz also sees opportunities for insurers in energy resilience, operational continuity, and technology risk.

Claims data illustrate how a failure at a major facility can produce losses running into hundreds of millions of dollars.

Allianz Commercial’s analysis of insurance industry data center-related claims found that fire is the leading driver of loss severity, accounting for well over 50% of around EUR 700 million, or USD 800 million, in

Natural catastrophes ranked second in loss severity, followed by willful acts, including crime and cyber incidents, and then power failures.

Water damage was the most frequent cause of data center claims, followed by willful acts, fire, and equipment breakdown.

Business interruption was the primary driver of claims severity by line of insurance, highlighting the financial consequences when facilities cannot operate.

The risk profile is becoming more concentrated as hyperscale and colocation campuses bring multiple tenants, construction work, servers, utilities, and on-site infrastructure into the same physical or operational environment.

A single event can consequently generate claims across property, construction, business interruption, liability, cyber, and financial insurance lines.

Real-world claims involving hyperscale facilities show that damage to external cooling systems, hot works-related fires, and delayed start-ups caused by power disturbances have each produced losses ranging

“For insurers, the key question is not only the value of the building, but the concentration of value and dependency inside and around it. Power, cooling, batteries, fiber routes, testing and commissioning, and business continuity planning are all part of the same risk picture. Effective risk mitigation must begin early and continue throughout the data center lifecycle. Resilience must be designed in from the earliest planning stage,” explains Christian Kolbe, Global Head of Construction Claims at Allianz Commercial.

Policy coordination can become another source of risk because data center projects pass through different construction and operational stages involving changing groups of stakeholders.

During construction, those parties can include the owner, developer, contractor, and subcontractors.

Once a facility becomes operational, stakeholders can include the owner-operator and potentially multiple tenants or end users.

A hot works-related fire at a data center nearing completion, for example, could involve different insurance policies and affect several stakeholders depending on when responsibility formally shifted from construction to operations.

“Clarity is critical with an insurance claim,” says Charlotte Field, Regional Head of Short-tail Claims, Asia, at Allianz Commercial. “Clearly documented handovers are essential between your construction all-risk policy and operational policy. There must be no ambiguity about practical completion, in order to avoid disputes over which policy responds to a particular event and the extent of cover.”