Alternative capital and captive insurance needed for data centre boom
As the size and value of new data centre builds escalates, brokers will need to be creative about finding capacity, Allianz’s Ed Croxford tells the Insurance Day podcast
OWNER and operators of data centres are likely to turn to alternative capital and captive arrangements to insure the largest data centre projects as demand for risk transfer capacity increases, the Insurance Day podcast has heard.
Ed Croxford, senior construction underwriter at Allianz, said insurance capacity would likely become one of the biggest challenges facing the data centre market as the value of projects increases.
Currently there is about $3bn of capacity in the market, enough to meet the current demand for new centres. However, with projects worth up to $45bn in the pipeline, Croxford said brokers will to need to be “more creative” in how they build capacity by creating towers and looking at non-conventional construction markets including alternative risk transfers and parametric products.
Given the scale of the technology companies involved, Croxford added that captives are also likely to be a route used to insure data centres. “They are the biggest companies in the world, they are definitely going to be going down the route of the traditional oil and gas companies. In the natural resources space, you see massive self-insured retentions, massive captives. And I think that’s very much what we will see going forward [in data centres] because of the lack of capacity in the insurance market.”
On the podcast, Croxford also discussed the risks specific to insuring data centres compared to other large construction projects, and the opportunities for insurers as centres move from the construction to the operational phase.
