War Is Now A Core Risk Category For Data Centre Operators

The insurance industry is grappling with increasingly complex risks as data centres expand and draw more attention from communities. A recent Howden report revealed that legal disputes involving data centres more than tripled from four in 2021 to 14 in the first half of 2026, with planning and environmental issues being the primary drivers.

Noise and nuisance complaints, including those related to diesel generator emissions and water consumption, have accounted for 78% of the growth in liability cases over the past three years. Europe hosts approximately 3,300 to 3,500 data centres, with Germany and the UK leading in capacity, but the rapid construction of these facilities is generating significant backlash from residents and regulators.

Ofgem, the UK's energy regulator, has already raised concerns about speculative data centre projects straining Britain's electricity network. The insurance sector also faces growing exposure to geopolitical instability and conflicts worldwide. According to the Howden report, data centres within 10-15 km of active global conflict zones accounted for 60% of the total recorded in the previous five years, signaling the rapid expansion of digital infrastructure near war-torn regions.

Scary incidents, such as Iranian drones striking five data centres in the UAE and Bahrain during the early stages of the US war in Iran, demonstrate the severe consequences of these attacks.

As physical and digital risks converge, the lines between cyber, property, and war insurance are blurring. Specialists in the field emphasize the need for adaptation, calling for alignment of policy wordings and rigorous cyber-physical risk assessments. Edward Howland Jackson, chief commercial officer at Howden, stated, "The AI boom is fuelling huge investment in data centres globally, but as our analysis shows, the risks associated with this expansion are wide-ranging and increasingly complex."

For data centre operators, developers, and investors, understanding where risks are concentrated is critical. The insurance market opportunity lies not just in providing more capacity but also in leveraging data, specialist advice, and risk transfer to help clients identify exposures early and build resilience as the sector continues to expand.