Executive Summary
Data centers have moved from a niche asset class to the backbone of the global economy. Fueled by artificial intelligence, cloud computing, and digital services, development is accelerating at unprecedented speed—and so are the risks.
Market momentum
- Hyperscaler IT spending is projected to exceed $260 billion in 2025, double the amount invested in 2023 by Microsoft, Google, Amazon, Meta, and Oracle.
- Capital spending on mechanical and electrical systems is expected to surpass $250 billion by 2030, reflecting the need for highly specialized infrastructure.
- Global digital infrastructure investment will likely exceed $1 trillion this decade, reshaping construction, real estate, and energy markets worldwide.
- Vacancy rates in primary markets fell to a record-low 2.8% in 2024, while more than 90% of new builds were pre-leased before completion.
- More than 335 data centers are currently under construction in the U.S., with Virginia, Texas, Ohio, and Arizona leading activity.
- Spending on data center construction grew 45% in 2024 and is expected to rise another 25% in 2025, underscoring the scale of industry momentum.
Lifecycle risks
Data center projects span at least three to six years, from planning to operation, with risks that shift across each phase.
- Site and energy procurement is the gating factor for every project, with risks tied to power access, interconnection delays, and permitting hurdles.
- Construction and commissioning introduce significant complexity, including supply chain volatility, reliance on specialized trades, and the testing of critical systems.
- Operations expose data centers to ongoing risks, from uptime liability to cyber-physical threats and the challenges of evolving technology refresh cycles.
- Coverage disputes may arise at the transition from construction to operations, creating costly gaps if insurance programs are not aligned.
Insurance challenges
Traditional insurance products were not built for the convergence of real estate, energy, construction, and technology. Today’s market is defined by:
- Fragmented coverage towers spanning several insurers, each with unique exclusions.
- Inconsistent policy language across standard and non-standard forms.
- Rising frequency of large losses, prompting insurers to tighten terms.
- Evolving operational risks, from operational technology (OT) cyber incidents to environmental liabilities, and more energy and electrical infrastructure including onsite generation.
Strategic solutions
To protect long-term investments, stakeholders must adopt a lifecycle approach to risk transfer.
- Early engagement with insurance partners helps ensure resilience and secure favorable terms.
- Diversified solutions such as parametric insurance, catastrophe bonds, and SLA coverage complement traditional programs.
- Clear allocation of responsibilities across developers, contractors, operators, and energy providers minimizes potential disputes.
- Adaptive strategies keep programs aligned with evolving technology, regulation, and climate risk.
A strategic partnership with The Baldwin Group
The convergence of construction, real estate, technology, and energy requires partnering with an advisor who brings interdisciplinary expertise, including:
- Integrated risk advisory across every stage of development
- Deep expertise in contracting and risk allocation between stakeholders at each stage
- Advanced risk engineering and climate modeling to strengthen resilience
- Deep insurer relationships to negotiate broader protections and cohesive program structures
Insurance is more than a safeguard—it is a tool that can empower stakeholders across the digital infrastructure ecosystem to stabilize returns, unlock financing, and support growth.
In the full whitepaper, we explore:
- The new geography of data centers – highly specialized design and construction needs
- Planning for performance across the development lifecycle
- The energy equation
- Real estate – technical complexity and critical infrastructure
- Designing for uptime, efficiency, and insurability
- Balancing permitting and compliance with speed to market
- Managing construction risks and delivery
- Commissioning, compliance, and launch
- Continuity and performance in the operational phase
- Enabling longevity through strategic risk and insurance solutions
- Importance of working with experience partners
This document is intended for general information purposes only and should not be construed as advice or opinions on any specific facts or circumstances. The content of this document is made available on an “as is” basis, without warranty of any kind. The Baldwin Insurance Group Holdings, LLC (“The Baldwin Group”), its affiliates, and subsidiaries do not guarantee that this information is, or can be relied on for, compliance with any law or regulation, assurance against preventable losses, or freedom from legal liability. This publication is not intended to be legal, underwriting, or any other type of professional advice. The Baldwin Group does not guarantee any particular outcome and makes no commitment to update any information herein or remove any items that are no longer accurate or complete. Furthermore, The Baldwin Group does not assume any liability to any person or organization for loss or damage caused by or resulting from any reliance placed on that content. Persons requiring advice should always consult an independent adviser.
