Eesti Energia CEO: Data centers benefit the power system

Data centers are facing an insurance crisis alongside power shortages, neighbor complaints, and permitting delays. The insurance industry is struggling to design and price coverage for these massive, costly buildings, according to Joe Peiser, CEO of risk capital at Aon. Climate change impacts, such as drought and increased risk of floods, fires, and tornadoes, pose a significant threat to data centers, with up to 80% of projects globally exposed to such hazards.

Investors and insurers are questioning the physical integrity and siting of these buildings, as well as seeking more accurate forecasts about future climate exposure. Another major risk is the tight supply chain for power equipment, which could lead to extended downtime and more significant losses for insurers and their policyholders.

While insurers typically respond to novel risks by increasing coverage costs, the same approach may not be feasible for data centers due to the potential for significant financial losses. Peiser predicts that keeping data centers covered will be costly, with many critical questions unanswered about how insurers will respond to issues like power problems, permitting delays, or extreme weather that cause a data center to go offline or delay its launch.