How insurers underwrite AI data center construction

In short

For the largest AI data center builds, insurers do not sell a limit equal to the full project value. Zurich reports that average insured project values rose from about $150 million to $3 billion in five years, and Zurich says the market lacks the capacity to insure the biggest campuses to full value. Risk & Insurance on Zurich Insurers instead set the limit from an engineering estimate of the largest likely loss and spread that limit across several insurers. Marsh’s national builders risk practice leader says limits on mega projects in Marsh’s book usually run $1.5 billion to $3.5 billion. S&P estimates that only a third, at best half, of campus value is insured. ENR capacity report Zurich urges an early risk engineering review and adequate fire and hot work controls. Zurich also says underwriters add the delay in start up limit dollar for dollar to the estimated maximum loss, which limits how large a share each insurer will write. Zurich claims podcast

Why is an AI data center build hard to insure?

Builders risk insurance is property insurance for a project while it is under construction. An AI data center build concentrates a very large amount of value on one site. Zurich’s average project through 2025 was about $785 million, and new projects in 2026 average more than $4 billion. Zurich claims podcast Five years earlier the average was $100 million to $200 million. Construction still takes about 24 to 26 months, close to Zurich’s average for every kind of project.

Marsh’s national builders risk practice leader estimates the largest projects at $5 billion to $25 billion, up from $1 billion to $2.5 billion two years earlier. ENR capacity report Swiss Re says building a single location can cost more than $20 billion, and the value can double once the computing equipment is installed. Swiss Re sigma report

The share of project value in equipment has also grown. The core and shell is the outer building. Five years ago, each dollar of core and shell came with about 50 cents of equipment inside it. Zurich now sees close to $2 of equipment for each dollar of core and shell in some cases, and much of that equipment takes many months to replace. Zurich claims podcast

Large campuses also open data halls one at a time while construction continues next door. Howden counts about 9 million square feet of planned expansion on sites that are already operating, equal to 125% of the space already in operation there. Howden supercycle report A fire in the construction zone can therefore damage a hall that is already producing revenue.

My guide to construction insurance for AI data centers explains the policies that cover a build. Before writing those policies, an insurer decides whether to take the risk and on what terms.

How much capacity does the market have for one project?

For one large campus, the market usually provides a few billion dollars of property limit, not the full value. Marsh’s national builders risk leader told ENR that on a $10 billion project, the starting point for the limit is $2.5 billion. ENR capacity report Across Marsh’s book, limits on mega projects tend to run $1.5 billion to $3.5 billion, and the same Marsh leader knew of only three placements above $5 billion.

Willis says the global market can provide up to $15 billion for large scale risks of this kind if necessary. Willis capacity release Lockton’s US practice leader estimates the global figure at about $15 billion to $20 billion. The same Lockton leader says the largest projects must use capacity from markets well beyond the US, the UK and Bermuda. Insurance Business on Lockton AIG’s chief executive said in August 2026 that the limits the buildout requires are at the maximum the property and casualty industry can provide. Claims Journal on AIG

Why insurers write to a loss estimate instead of full value

A probable maximum loss, or PML, is an engineering estimate of the largest loss one event is likely to cause. ENR capacity report Insurers use several names for estimates of this kind, and Zurich calls its version the estimated maximum loss. Zurich claims podcast A hyperscaler is one of the largest cloud and AI companies, such as Alphabet, Amazon, Meta, Microsoft and Oracle. Howden says the exposures in a single hyperscale development are now often so large that insuring to full insured value is no longer economic. Underwriters therefore price against the maximum probable or maximum foreseeable loss instead. Howden supercycle report

Zurich says a full value limit is often not needed. Many campuses place their buildings far apart on large sites, and that separation makes a total loss less likely. Risk & Insurance on Zurich Marsh’s national builders risk leader says PML analysis now routinely includes a separate tornado PML alongside fire modeling, because most hyperscale campuses are in regions exposed to tornadoes. ENR capacity report

Swiss Re warns that a tornado’s path and its debris can cross several separate buildings on the same campus. Swiss Re sigma report In that case a single storm could cause a larger loss than a typical PML, which assumes that one event damages one building.

Why delay in start up coverage uses capacity

Delay in start up coverage, often called DSU, covers time element exposures such as future lost earnings or rent. Zurich says underwriters typically treat DSU as fully exposed, so each dollar of DSU limit adds a dollar to the estimated maximum loss. Zurich claims podcast A larger DSU limit therefore restricts the share of the project each insurer will write. Zurich sees DSU requests of $300 million to $600 million on an average risk, and one of its largest so far was about $2 billion.

Marsh’s national builders risk leader says lost rent on a hyperscale campus can come close to the construction cost itself. The same Marsh leader says that without DSU, limits of $8 billion to $9 billion or more could be placed. ENR capacity report

Howden notes that DSU coverage applies only to a delay caused by insured physical loss, so a delay caused by labor shortages or late equipment is not covered. Howden supercycle report An underwriter at Munich Re says that if a delivery is late and nothing has broken, the policy does not pay. Munich Re capacity note

What lenders want, and the uninsured gap

Lenders often require a limit equal to the full construction cost. Swiss Re says lenders demand that limit even when the probable loss is far lower. The market can provide only a fraction of that limit at competitive rates under traditional construction policies. Swiss Re sigma report Zurich says the change came in the summer of 2025, when capital markets began requiring full limits on many projects worth several billion to tens of billions of dollars. Zurich claims podcast

S&P analysts estimate that the insured share is a third, maybe at best half, of total campus value, and hyperscale developers keep the rest of the risk. ENR capacity report The shortfall can also affect financing. Moody’s noted reports that investors, including Blackstone, declined to buy debt for these projects in March because the insurance was not enough. Insurance Business on Alliant My guide to project finance for AI data center construction covers what lenders require of the insurance program.

How is a project worth billions placed across many insurers?

A large program is divided into shares and layers. One insurer leads and writes the policy wording. Other insurers each take a percentage of the same layer, more insurers take higher layers above it, and reinsurers take on part of the risk from those insurers.

The lead insurer and the quota share panel

The lead insurer typically sets the wording, which is then taken to the rest of the panel. An engineering underwriter at Munich Re says this step is usually not easy, because one insurer may disagree and the wording has to go back until every insurer offers one set of terms. Munich Re market note

In a quota share, each insurer pays a fixed percentage of every loss in that layer. The insurance and risk management leader at DPR Construction, a contractor, says many megaproject policies now use several insurers in a quota share. That structure keeps any one insurer from committing too much capacity to one project. ENR capacity report Chubb’s chief executive describes the same model from the lead insurer’s position, with Chubb providing large capacity and other insurers taking the remaining shares. Reinsurance News on Chubb

Munich Re can commit up to $250 million to one construction project, all of it from its own balance sheet, without buying reinsurance for each deal. Munich Re market note Zurich designed its Data Center Project Guard form for projects over $250 million, and on those projects Zurich participates only as lead insurer. Zurich Project Guard page

How excess layers of coverage work

An excess layer pays only after losses exhaust the layer below it. Munich Re says layering lets different insurers participate at different loss levels, which makes more of the market’s capacity available. Munich Re market note

On an $18B New Mexico project, Kinsale wrote a $10M share of a $1B layer that sits above the first $2.5B of loss. Kinsale also writes excess coverage for a single peril, such as severe convective storm. Kinsale excess page The Fidelis Partnership launched a consortium in November 2025 for excess construction layers, starting with $250 million of capacity. Reinsurance News on Fidelis

A layered program can make a claim harder to resolve, because the insurers in it can use different wordings and take different positions on the same loss. For that reason, consistent wording across layers and claims procedures agreed in advance are important. Law firm analysis

How reinsurance supports the panel

Reinsurance is insurance bought by insurers. A treaty reinsures a whole book of policies automatically, and facultative reinsurance covers one risk at a time. Aon’s chief executive said in January 2026 that Aon designed and placed the first reinsurance treaty built specifically for data center risk. The treaty provides as much as $5 billion of capital to support a single lead insurer. Reinsurance News on Aon treaty

AXA XL’s North America reinsurance chief executive says reinsurers want to work with insurers that have the strongest risk engineering. AXA XL reinsurance view Reinsurers may also cap the insured value of any one site within a treaty, ask for more frequent reporting, or accept AI data center risks by special acceptance. Special acceptance means the reinsurer agrees, case by case, to include a risk the treaty would otherwise exclude.

A Munich Re cargo underwriter says US projects are often placed in London, because the London market can spread the risk easily across facilities and insurers. Munich Re market note

Capital markets and alternative capital

Guy Carpenter, a reinsurance broker, tracks more than 1,500 projects worldwide, with more than 50 above $7.5 billion. Artemis on Guy Carpenter Guy Carpenter reports portfolio placements and sponsored risk pools backed by quota share and collateralized reinsurance. Collateralized reinsurance is reinsurance fully backed by money held in trust, often supplied by pension funds and other investors.

A catastrophe bond pays an insurer when a defined disaster occurs, and in that case the investors can lose some or all of their investment. In September 2026, an investment firm’s chief investment officer told CNBC that no data center risk had yet come to the catastrophe bond market. The same investor expects the first dedicated deal within 12 to 18 months. CNBC on cat bonds A single campus can carry insured value equal to about a third of all catastrophe bonds outstanding.

Accumulation across an insurer’s portfolio

Accumulation is the total exposure an insurer holds that one event could affect. Swiss Re notes that a building, its equipment and its power plant are sometimes insured under separate programs, so an insurer may not see its full exposure to one site. Swiss Re sigma report One insurer could insure the building for one client and the GPUs inside it for another without the overlap being immediately apparent. Insurance Business on Lockton

Concentrating value on one campus increases accumulation. A frontier AI campus has a gigawatt or more of power capacity and its own power generation, and the developer and the hyperscaler tenant may each buy separate insurance for the same site. Aon’s North America digital infrastructure lifecycle practice leader says the combined values of every stakeholder at one campus can exceed $50 billion. ENR capacity report Aon’s head of commercial risk for Asia Pacific suggests building six separate $5 billion sites rather than one campus worth $30 billion to $40 billion. Insurance Business on Aon

Which insurers, reinsurers and brokers write AI data center construction?

A small group of large insurers leads most programs, and the major brokers run named facilities that arrange capacity in advance. The table lists the programs named in published material, in no order of rank.

The insurers

Zurich has insured more than 250 data center projects across more than 20 states. A Zurich executive puts the value of the data center projects Zurich has insured at over $350 billion. Zurich Project Guard release Project Guard became available for new US projects on January 1, 2026, on a project specific, non admitted basis. Non admitted means the policy is written through surplus lines brokers rather than as a product filed with each state. The Project Guard form adds limits for failure of climate control systems and for losses in transit and at supplier and offsite locations. The form also includes parametric weather coverage for the first year of construction and up to 12 months of operational property coverage after the build.

AIG offers up to $750 million for construction and up to $750 million for operational property, and in specific cases AIG can offer more through custom placements. AIG says its programs range from about US$320M to more than US$25B of total insurable value. AIG data center playbook Chubb’s chief executive lists builders risk, engineering, marine, surety and professional lines, plus energy and utility coverage for the power supply side of a project. Reinsurance News on Chubb

FM raised the capacity it offers through FM Intellium, its unit for data centers and power generation, to $5 billion. DCD on FM and Aon Marsh’s national builders risk leader says reaching higher limits requires capacity from insurers such as FM Global. ENR capacity report Advanced Technology Assurance launched a facility of up to $750 million backed by more than 10 insurers and reinsurers, including Lloyd’s syndicates, Arch Insurance International, Munich Re Specialty and Scor. DCD on FM and Aon The Fidelis Partnership committed $1.6 billion of capacity to data center risks in 2025. Insurance Business on Fidelis

Swiss Re Corporate Solutions publishes builders risk engineering guidance for these projects. Swiss Re builders risk note AXA XL writes builders risk and excess casualty coverage for these projects in the US. AXA XL builders risk note Liberty Mutual recently created a North America construction team. Insurance Business on handoffs

The brokers

Marsh launched Nimbus for construction in June 2025 and expanded Nimbus to $2.7 billion in January 2026, including delay in start up and business interruption coverage. Marsh Nimbus release Nimbus also covers handed over data centers until final practical completion, under one policy regardless of how the project is phased. Marsh Nimbus page In August 2026 Marsh added Stratus, an exchange offering up to $10 billion of property capacity for the operating phase, with 30 traditional and alternative capital providers. Artemis on Stratus Marsh also provided project risk analysis and insurance services for Meta’s El Paso, Texas campus, a venture with BlackRock carrying about $14 billion of development costs. Reinsurance News on Meta

Aon expanded its program to $5 billion in July 2026. The Aon program now provides up to $200 million of third party liability coverage outside the US and $100 million inside the US. The program also provides $400 million of cyber and technology errors and omissions coverage, $500 million of project cargo coverage and up to $1 billion of terrorism capacity. Aon July release Lockton launched its program in September 2026 with more than $6 billion of builders risk capacity and $7.5 billion of operational property capacity. Lockton program release Willis’s Digital Infrastructure Protector combines construction and operations in one program, and Willis still offers separate policies to clients who want them. Willis product page Alliant has formalized its own practice for these projects. Insurance Business on Alliant

How buyers compare insurers and programs

I found no published ranking that names a best insurer for this risk. A buyer comparing insurers can look at lead capacity, how the form handles phased handovers and climate control failure, the depth of the insurer’s risk engineering team, and claims handling. On construction claims, for example, AIG promises, once coverage is confirmed, to advance up to 50% of its share of an agreed property damage estimate within seven days. That promise does not apply to delay or business interruption losses. AIG data center playbook A Munich Re underwriter says a buyer should know which insurer ultimately carries the risk and whether that insurer will be able to pay. Munich Re market note

What does an underwriter ask for before quoting?

Underwriters want complete information about a project before they commit capacity. An underwriter at Munich Re says an unclear submission gets less capacity and worse terms. Munich Re capacity note Missing information leaves the underwriter to price the project on assumptions.

The submission package

AXA XL lists what a strong builders risk submission contains. AXA XL submission guide

1. An application naming the insured, the owner, the contractor, the location and the project, with the limits and deductibles wanted.
2. Site plans or elevation drawings, which AXA XL overlays on satellite images to check flood exposure, nearby buildings, hydrant and fire station distance and site elevation.
3. The summary section of the geotechnical report on soil and foundations.
4. The construction schedule, which shows when the highest risk work takes place.
5. A budget breakdown, which tells adjusters what costs to expect after a loss.
6. Financial projections for lost income or rent, and a breakdown of soft costs.
7. A water intrusion management plan or a quality control program.

Zurich’s general builders risk questionnaire asks for similar information and more. Zurich questionnaire The questionnaire asks whether the project will be turned over in phases or occupied before completion. It also covers fire department distance, hydrants on site, security, wind load design, finished floor elevation, the emergency plan, hot testing, crane use, damage to existing property and third party quality control.

The risk engineering review

Insurers have their own risk engineers review a project. Zurich’s risk engineers spent 500% more hours on data center reviews in 2025 than in 2020. Risk & Insurance on Zurich Munich Re sends its risk engineers to project sites. They focus on critical elements such as fire protection, checking how well the systems work, when they become operational and how much of the site they protect. Munich Re capacity note

The head of Liberty Mutual’s North America construction team says insurers were once more willing to waive risk engineering, and now they want to verify the risk before writing it. Insurance Business on handoffs Allianz says underwriting is becoming engineering led, because the technology changes faster than claims history can accumulate. Allianz claims report

Fire protection and hot work

In industry claims worth about €677 million that Allianz analyzed, fire caused well over half of the value. Allianz claims report An FM study cited by Swiss Re found that fire caused 10.9% of loss events but 42.3% of loss costs. Swiss Re sigma report

Hot work means welding or any other activity involving high heat that could start a fire on a project site. Zurich’s largest loss in 2025 was a hot work loss from welding of about $50 million gross. Zurich claims podcast In one high severity loss, workers welded along a roof joist after the HVAC system was installed but before permanent fire protection was in place. A spark ignited an air filter, and the temporary fire blankets could not contain the fire. Risk & Insurance on Zurich

Underwriters check several controls.

• A formal hot work program, which AmRisc’s questionnaire asks about directly. AmRisc questionnaire
• Working fire protection before systems start up. HSB, an engineering insurer, treats active fire protection and detection in its commissioning guide as a top priority item for each section before start up. HSB commissioning guide
• Enough water at remote sites to fight a large fire, which Zurich now asks about. Zurich claims podcast
• A named fire prevention program manager, which NFPA 241, the standard for fire safety during construction, requires the owner to designate. Koorsen on NFPA 241

FM’s 2026 guidance for these facilities raised the recommended fire rating for walls from one hour to two hours and made its sprinkler recommendations stricter. Swiss Re sigma report

Battery storage separation

Lithium ion battery backup units are now built into server racks, and Swiss Re says these units bring an ignition source into rooms that never had one. Swiss Re sigma report Thermal runaway is a chain reaction in which one overheating cell heats the next, producing a fire that is very hard to put out.

The International Fire Code sets minimum requirements. Section 1207.5.1 of the 2024 International Fire Code requires electrochemical energy storage to be divided into groups of no more than 50 kWh. Each group must be at least 3 feet from other groups and from the walls of the room. IFC section 1207.5.1 The fire code official may approve larger groups or smaller separation distances based on large scale fire testing. A separate exception covers listed lead acid UPS systems used for standby power, limited to 10% of the floor area. Like NFPA 241, the fire code applies only where the local authority having jurisdiction has adopted it, and that authority enforces it.

One insurer’s engineers recommend more than the code requires. The Hartford’s risk engineers recommend following NFPA 855 and, as industry best practice, placing battery containers at least 25 feet from critical buildings and 10 feet from each other. Where containers must be closer, The Hartford’s engineers recommend two hour fire walls. The same engineers also recommend gas detection, very early smoke detection for larger units, and explosion prevention or venting for small enclosures where flammable gas can build up. Hartford battery paper Starr says most property and builders risk policies for large, complex projects require documented planning for battery risk before coverage begins. Starr on battery storage AXA XL advises keeping spare battery units in listed cabinets outside the data hall and removing damaged units from the building. AXA XL engineering paper

Liquid cooling and leak detection

Water damage is the most frequent cause of claims, and Allianz found water damage behind 21% of claims by number. Allianz claims report An FM review cited by Swiss Re found that liquid losses made up nearly 24% of loss costs. About 10% of loss costs came from liquid escaping from new cooling systems, and 9.3% came from sprinkler leaks. Swiss Re sigma report Liquid cooling pumps coolant directly to plates on the chips, so pipes and fittings run right next to expensive hardware.

A leak detection system can use two kinds of sensors. Sensing cable can be laid around racks or under floors, and spot sensors can be placed around the room or under single pieces of equipment. The system is typically split into zones, so a leak can be traced to an area as small as a single square meter. DCD on leak detection A monitoring firm lists the points that leak detection should cover, including quick disconnect fittings, rack manifolds, coolant distribution units and drip trays. The firm also lists automatic shutoff where the design allows it. Maintech monitoring note

Amwins, an insurance broker, says closed loop liquid cooled racks can reassure underwriters. Amwins also says that sharing the technical details of the cooling design, under a nondisclosure agreement if required, is critical to lowering insurance costs. Amwins market insight Zurich added coverage for losses caused by failure of climate control systems, because servers are sensitive to humidity. Zurich Project Guard release

The commissioning plan

Commissioning is the period when installed systems are switched on, tested and run up toward full load before handover. Allianz ranks testing and commissioning among the highest risk phases of the whole build. Allianz claims report During commissioning, hidden defects appear for the first time, deadlines leave less time to find faults, temporary power and cooling may lack full backup, and many contractors work side by side.

HSB’s guide calls for a written commissioning plan and describes the most important parts of that plan. HSB commissioning guide

• A start up manager with authority to stop testing at any point.
• Turnover packages, which are defined sections of plant checked and signed over one at a time.
• A log of every temporary bypass of a safety control, each one approved in advance and reversed before handover.
• Fire protection that works in any area where testing creates a fire risk.

Work done in the wrong order can also cause losses. Zurich describes servers that were installed before construction was finished, which exposed the servers to condensation and dust. Zurich claims podcast Manufacturers may refuse warranty coverage for equipment exposed to condensation. A paper written for a 2026 conference of the Associated General Contractors of America, or AGC, notes that many builders risk policies do not treat a voided warranty as direct physical damage. AGC risk paper Amwins says the policy wording should define load testing triggers clearly, so everyone knows when construction coverage ends and operational coverage begins. Amwins market insight

Natural catastrophe modeling

Severe weather has been the top cause of loss in Zurich’s US builders risk portfolio for these projects for three years. In 2025, a tornado at one data center site was a leading cause of loss. Risk & Insurance on Zurich In 2026, 64% of the data center capacity under construction is outside traditional hubs, in places such as West Texas, Tennessee, Wisconsin and Ohio.

Swiss Re estimates that more than a quarter of US data center capacity may be located where large hail falls on three or more days a year. About 40% may be in zones of significant to very high tornado risk. Swiss Re sigma report Howden found that about 32% of US operating floor space was hit by tornado or hail over the past decade. Just 20 locations held about 80% of the affected space. Howden supercycle report Gallagher prepares catastrophe modeling reports, with a PML and suggested site changes, while sites are still being chosen. Gallagher contractor report

The contractor’s record

AmRisc’s questionnaire asks how many years the contractor has operated, whether the contractor has built this type of project and what share of the work it subcontracts. The questionnaire also asks whether the contractor had any single loss of $25,000 or more in the last five years. AmRisc questionnaire

According to the Associated General Contractors of America, 92% of US construction firms report difficulty finding qualified workers. Risk & Insurance on Zurich Large owners and contractors can recruit the most skilled workers for major projects, which may leave fewer skilled workers for other projects or encourage contractors to relax hiring standards. Insurance Business on handoffs HUB notes that moving to 800 volt DC power raises the risk of arc flash across the facility, and that licensed electricians with high voltage experience are hard to find. HUB on high voltage My guide to subcontractor and trade contractor risk covers the trades underwriters review most closely.

How do underwriters handle defects and the main exclusions?

Builders risk insurance covers sudden physical loss, but it does not pay to fix faulty design or faulty work as such. The underwriter decides how much coverage for defects to restore, and the exact wording the parties choose decides how actual claims are paid.

Defects wording and how courts have applied it

The London Engineering Group published three model defects exclusions in 1996, and many US insurers now use them or their own versions. IRMI on LEG 3 LEG 1 excludes defects outright. LEG 2 excludes the cost that would have been spent to fix the defect if it had been found before any damage occurred. LEG 3, the least restrictive, excludes only the cost of improving the original design or workmanship.

A federal court in Washington, D.C. applied LEG 3 wording in South Capitol Bridgebuilders v. Lexington Ins. Co., a 2023 bridge case decided under Illinois law. IRMI on LEG 3 Concrete in the bridge supports had voids that reduced the bridge’s weight bearing capacity. The court held that the lost capacity was damage, found the LEG 3 extension ambiguous, construed it against the insurer and held the insurer liable for breach of the policy.

The Florida Supreme Court reached the opposite result under a different clause in Swire Pacific Holdings v. Zurich Insurance Co. In that case, a developer spent about $4.5 million fixing structural design errors in a Miami condominium tower. Swire Pacific v. Zurich The court held that the design defect exclusion barred coverage for that cost, because no separate loss resulted from the defect. The court also held that the policy’s sue and labor clause, which pays the cost of protecting insured property, applied only once an actual covered loss had occurred or was in progress. Money spent to prevent a collapse was therefore not recoverable. The court said builders risk insurance does not guarantee against design and construction defects.

The AGC paper also says courts are divided on ensuing loss clauses, which restore coverage when excluded faulty work causes a separate, covered peril. AGC risk paper Some courts read ensuing loss clauses broadly, while others require a separate and independent cause of the later damage.

Other exclusions underwriters negotiate

The AGC paper describes most of these gaps in coverage as they arise on these projects. AGC risk paper Gallagher identifies several of the same problems for contractors, especially damage to finished areas during phased work. Gallagher contractor report Liquidated damages are amounts that a contract requires one party to pay for delay or for missed performance targets. Munich Re offers coverage for much of the difference between the large damages an owner owes a tenant under a service level agreement and the smaller damages the owner can recover from its contractor. Munich Re damages cover

What determines the rate and the deductibles?

Rates and deductibles depend on the facts the submission shows. The main factors are how much value is concentrated in one place, catastrophe exposure, fire and water controls, the size of the delay limit and the current state of the insurance market.

What affects the rate

Allianz lists the characteristics that make one project riskier than another. Allianz claims report

• Multi story buildings with heavy loads and concentrated value
• Secondhand or prototype equipment
• Retrofits of existing buildings
• Steep terrain or poor ground
• Compressed schedules and late scope changes
• High natural catastrophe exposure

The insurance market cycle also affects the rate. Lockton described favorable conditions for buyers in early 2026, with new capacity entering the market and competitive rates. Lockton market update Marsh’s national builders risk leader warns that the market reacts to losses, and that a loss of $2 billion or more would lead insurers to look harder at pricing. ENR capacity report Willis argues that many buyers purchase more limit than their actual exposure requires, and that spending on resilience can reduce the limit a buyer needs. Insurance Business on Willis

AXA XL has offered improved rates and terms, decided risk by risk, to construction projects of $200 million or more that use technology to reduce risk. The eligible sectors AXA XL named include health care and manufacturing. Business Insurance on AXA XL

How deductibles are set

A deductible is the amount of a loss the insured pays before the policy pays. Builders risk programs usually have several deductibles. The all other perils deductible applies to ordinary losses, and flood, earthquake and water damage often have their own deductibles. Named storm deductibles are often set as a percentage, and delay coverage usually begins only after a waiting period measured in days. AmRisc questionnaire, Zurich questionnaire

Insight Risk says insurers now set water damage deductibles at multiples of the all other perils deductible, often $250,000 to $1 million or more per occurrence. Insight Risk sells a buydown that can lower the water deductible to the all other perils level. The buydown requires the project to deploy Insight Risk’s monitored sensors and, in one of its three packages, remotely operated shutoff valves. Insight Risk buydown page Engle Martin, a claims adjusting firm, says about 90% of the builders risk claims it sees involve water, usually at 75% to 85% completion, when water service is turned on. Engle Martin claims note

Should an owner buy a master builder’s risk program or a policy for each project?

A master builder’s risk program covers many projects under one policy, while a project specific policy covers one site. The better choice depends on how many projects an owner builds, how similar the projects are, and how much limit each project needs.

A master program can be written as a reporting form. The contractor adds and removes projects as they begin and end, new projects that fit the terms are covered immediately, and premium is paid only on active projects. AXA XL lists points to weigh before buying, including a refundable escrow deposit typically required at the start and strict monthly deadlines for reporting new projects. AXA XL adds that the form suits contractors whose projects are fairly similar. AXA XL reporting form Roehr, an insurance agency, describes project policies as suited to individual high value builds and master programs as cost effective for contractors running many projects at once. Roehr builders risk note

The California State University’s master builders risk program for 2018 to 2020 set a $100 million per occurrence limit and a $25,000 general deductible, with separate deductibles for flood and water damage. Each reported project was covered for up to 42 months, with quarterly reporting. CSU program summary

For AI data center campuses, the limit each site needs usually decides which structure to use. A master program sets one per occurrence limit for all of its projects, such as the CSU program’s $100 million limit. CSU program summary Limits for one hyperscale campus run in the billions of dollars. ENR capacity report Zurich writes Project Guard on a project specific basis. Zurich Project Guard release Large phased campuses increasingly use phasing endorsements, which remove completed portions from the policy while construction continues elsewhere. ENR capacity report Guy Carpenter describes portfolio programs that set eligibility rules and engineering standards once and then place many builds under one framework. Artemis on Guy Carpenter

What happens to coverage when part of the campus starts operating?

Builders risk coverage is meant to end when construction is complete, and on a phased campus the date of completion can be unclear. Underwriters now want the transfer to operational coverage settled in the policy rather than disputed after a loss.

The AGC paper notes that insurers often argue that work is substantially complete to limit coverage, and that courts have divided on the point. The paper describes a federal court in Arkansas that enforced termination of coverage once a partly built fertilizer plant was more than 40% occupied. It also describes a Michigan court that held partial occupancy of a few apartments did not trigger completion of a larger project. AGC risk paper Gallagher adds that standard builders risk policies usually do not cover damage that ongoing construction causes to finished, operating parts of the site. Gallagher contractor report

Insurers now offer coverage that continues through the handover. Zurich’s Project Guard offers up to 12 months of operational property and time element coverage tied to the handover schedule. Zurich Project Guard page Aon’s program moves each phase from construction coverage to operational coverage automatically and reduces the delay sum insured as phases begin operating. Aon program page The head of Liberty Mutual’s North America construction team describes policies that add operational coverage at the end of the builders risk period with the same insurer. Insurance Business on handoffs

Marsh’s national builders risk leader says most builders risk policies cover only the core and shell, and a separate operational program covers the computing hardware once owners and tenants install that hardware. ENR capacity report My guide to operational insurance for AI data centers covers the site once it is operating.

How do owner and contractor controlled insurance programs affect underwriting?

A wrap up is one insurance program that covers the entire project and most, if not all, of the participants on site. A wrap up is usually bought by the owner or by the general contractor. An owner’s program is called an owner controlled insurance program, or OCIP, and a general contractor’s is called a contractor controlled insurance program, or CCIP. AGC risk paper OCIPs and CCIPs give uniform, consolidated coverage for various risks of a large construction project. NASBP on wrap ups Builders risk is a separate property policy, while most wrap ups include general liability and excess coverage and some add workers’ compensation. AGC risk paper

Wrap ups are common on projects of this size. The AGC paper warns that wrap ups often carry excess limits too low for the risk and unusual exclusions, such as one for property damage during construction. AGC risk paper Enrolled contractors usually cannot rely on their own corporate policies, because those policies contain wrap up exclusions. A large site can have tens of thousands of workers at its peak, which increases the injury exposure the liability underwriter prices.

Marsh’s Nimbus Casualty offers up to $75 million of excess general liability coverage for US builds, above underlying limits of $25 million or more. The Nimbus Casualty form follows the terms of the underlying policies. Insurance Business on Nimbus Casualty The head of Liberty Mutual’s North America construction team says much of the excess business in Liberty Mutual’s construction book still faces double digit rate increases. Insurance Business on handoffs Swiss Re notes that surety bonds and subcontractor default insurance are becoming more important as engineering complexity rises. Each site relies on many specialized subcontractors, and a subcontractor’s default can cause delays. Swiss Re sigma report My guide to surety bonds for AI data center construction covers surety bonds in more detail.

Where do captives and parametric coverage fit?

Captives and parametric policies cover risks the traditional market cannot or will not insure. Large owners keep much of their risk in insurance companies they own, and parametric coverage pays quickly for defined weather events.

A captive is an insurance company owned by the business it insures. S&P expects many large operators to continue using captives for portions of their risk. Captive International on S&P Some of the largest hyperscalers self insure much of their own risk, and their balance sheets are comparable to those of major insurers. Insurance Business on Stratus A captive often needs a licensed insurer to issue the local policy and transfer the risk back to the captive, an arrangement called fronting. AIG says more than $4 billion of premium flows through its network to captives each year. AIG data center playbook

Parametric coverage pays a set amount when a trigger agreed in advance is reached, such as a wind speed or a rainfall total. Zurich includes parametric weather coverage in Project Guard for the first year of construction, paying for rain and wind delays. Zurich Project Guard page Zurich’s release says this coverage pays for specified weather delays that involve no physical damage. Zurich Project Guard release Descartes Underwriting, which sells parametric insurance, offers up to $140 million per policy for perils such as tornado and flood, with payments in days or weeks. Descartes data center page Descartes says its coverage can pay amounts within monetary and time deductibles and can pay delay losses while equipment is on site but the building is not yet enclosed.

Allianz’s head of construction for the Americas says the traditional market alone cannot always fully absorb the largest and most complex exposures. For those exposures, structured solutions, captives and parametric products are becoming an important part of how large technology companies handle risk. Allianz claims report Guy Carpenter reports that parametric outage layers and collateralized structures are being used for power grid events that affect many sites at once. Artemis on Guy Carpenter

Key takeaways

• On the largest AI data center campuses, the limit is set by an engineering loss estimate, not by project value, and the owner keeps the uninsured difference.
• Delay in start up coverage uses an insurer’s capacity dollar for dollar, so a larger delay limit reduces the physical damage limit the market will offer.
• The lead insurer writes the wording that every following insurer accepts, so the choice of lead insurer sets the terms of the whole program.
• A complete submission gets more capacity. Site plans, the schedule, a budget breakdown, delay projections and a water management plan give the underwriter facts in place of assumptions.
• Fire protection timing, hot work control and battery separation get close review, and documented battery planning can be a condition of coverage.
• Liquid cooling requires a leak detection design that an underwriter can review, with sensor zones covering fittings, manifolds and coolant distribution units, and automatic shutoff where possible.
• A written commissioning plan with defined test triggers lowers loss risk and reduces disputes over when builders risk coverage ends.
• The defects wording, whether LEG 2, LEG 3 or the insurer’s own, decides how much loss from faulty work is covered, and courts have read similar clauses very differently.
• A master program suits many similar projects. A single hyperscale site usually needs its own policy or a phased program with handover coverage built in.
• Water damage deductibles are often far higher than the general deductible, and monitored leak detection can lower them.

Frequently asked questions

Q:How do major insurers underwrite large scale AI data center construction?

A:Insurers set the limit from an engineering estimate of the largest likely loss, model fire and tornado losses separately, and spread the limit across several insurers in a quota share. ENR capacity report A lead insurer typically sets the wording, and other insurers take layers at different loss levels. Munich Re market note Before quoting, underwriters also check hot work controls and the contractor’s record. AmRisc questionnaire

Q:Which insurers write AI data center construction risk?

A:Zurich, AIG, Chubb, FM, Munich Re, Allianz Commercial, AXA XL, Swiss Re Corporate Solutions and Liberty Mutual all appear in published material as active writers. Lloyd’s capacity is available through groups such as The Fidelis Partnership and Advanced Technology Assurance, and Kinsale writes small excess shares. I found no published ranking that names a single best insurer, so a buyer should compare lead capacity, phased handover terms, risk engineering depth and claims handling.

Q:What is the difference between a standard builder’s risk policy and a master builder’s risk program for several projects?

A:A standard policy insures one project for one policy term. A master program insures many projects under one policy, adds each project as it starts, sets rates in advance and requires regular reporting. AXA XL reporting form A master program sets one per occurrence limit for all of its projects, while one hyperscale campus can need billions of dollars of limit. A single campus therefore usually has its own policy or a phased program.

Q:How much insurance can one AI data center project buy?

A:In Marsh’s book of business, most mega project property limits run $1.5 billion to $3.5 billion, and placements above $5 billion are rare. ENR capacity report Willis says up to $15 billion could be assembled for large risks if a buyer needs it. The delay in start up limit and pricing both affect how much physical damage limit a buyer can actually place.

Q:Why do lenders’ insurance requirements cause problems?

A:Lenders often require a limit equal to the full construction cost, even though the probable loss is much lower. Swiss Re says the market can provide only a fraction of that limit at competitive rates under traditional construction policies. Swiss Re sigma report The shortfall has affected financing, and some investors have reportedly declined to buy debt for these projects because the insurance was not enough.

Q:Does delay in start up insurance cover late equipment or labor shortages?

A:No. Delay in start up coverage pays only when insured physical damage causes the delay. Howden supercycle report A late transformer or a shortage of workers, with no physical damage, is not covered. Parametric weather coverage can pay for some delays without damage, but only for the defined weather events.

Q:Do insurers require battery storage to be separated?

A:The International Fire Code sets minimum requirements where a jurisdiction has adopted it. Section 1207.5.1 of the 2024 code limits battery groups to 50 kWh each, kept at least 3 feet apart. The section lists exceptions, including approval by the fire code official based on large scale fire testing. IFC section 1207.5.1 The Hartford’s risk engineers recommend wider spacing for battery containers, and Starr says documented battery planning is often required before coverage starts.

Q:Are catastrophe bonds used to insure these projects?

A:Not yet. In September 2026, an investment firm’s chief investment officer told CNBC that no data center risk had yet come to the catastrophe bond market. CNBC on cat bonds The same investor expects the first dedicated deal within 12 to 18 months, most likely covering hurricane or earthquake risk that the market already knows how to model.

Q:Can a captive insure part of an AI data center build?

A:Yes. Billions of dollars of construction exposure on these projects remain on balance sheets or flow through captive structures. ENR capacity report Many large operators use captives to cover portions of their risk, and S&P expects that practice to continue. Captive International on S&P A licensed insurer usually issues the policy and transfers the risk to the captive, an arrangement called fronting.