The rise of the reliable, resilient data center
A version of this article originally appeared as partner content sponsored by FM in the Financial Times.
Data centers now represent critical infrastructure – and owners are increasingly partnering with insurers to devise effective strategies to preempt outages
Data centers are essential to digital technology, and their numbers are growing, driven by the expansion of cloud computing and AI. Global demand is set to grow at a CAGR of 8.5 per cent to 2030 according to a recent report – and that may be a conservative estimate.
Both the private and public sectors are now almost entirely dependent on the services of data centers, so they need to be built, operated and maintained to the highest standards. Outages cause major disruption and are expensive for businesses and service providers. Although incidents are declining, the cost of downtime is increasing. One in five outages cost more than $1mn, according to the most recent annual Uptime Institute survey.
Outages triggered by cooling failures, as with the London incidents during the heatwaves of summer 2022, can cause inconvenience, reputational damage and, for financially regulated companies, risk putting them in breach of new regulations under the EU’s Digital Operational Resilience Act (DORA).
A stronger safety net
With cross liabilities for sites covering hundreds of millions of dollars of property, equipment and business interruption, some insurers are using their expertise to embed themselves deeper into the infrastructure to ensure greater resiliency. This involves calculating numerous variables, ranging from siting, build quality and equipment reliability to cooling and fire risk, as well as network connectivity, cyber and physical security.
Global insurer FM has been providing cover for data centers for more than 25 years. Currently it helps protect around 1,100 data centers – approximately $250bn of insurable value. In May 2025, it announced FM Intellium, a program that brings together its expertise in data centers and power generation. To support Intellium, FM has created a virtual unit that can mobilize experts to respond quickly to any inquiry, on demand, anywhere in the world. “Partnership is a core part of our approach,” says Adrian Oxley, Principal Engineer, Semiconductor/Digital, at FM. “We work with our clients long-term to reduce risk. We also want to learn from them because this industry is moving incredibly fast: there’s a stampede and we need to stay ahead of the curve.”
Loss prevention guidelines and best practices for critical systems and equipment are regularly adopted by the industry, but hyperscaling is seeing new threats emerge. UPS (uninterrupted power supply) battery systems designed to keep centers running in the event of power loss increase risk through thermal runaway, even explosion. The business interruption aspect of a fire or battery incident can be critical for a hyperscaler, a financial institution or an airline. “Data center servers are running millions of transactions,” says Paul Heisel, AVP, High-Hazard Occupancy Specialist and Principal Underwriter for Data Centers at FM. “The cost, if those transactions are disrupted, could be an enormous amount of money.”
Thirsty for power
Meanwhile, reliable power is now a requirement for all tier standard-compliant data centers. The increase in numbers and demands of AI is such that Goldman Sachs estimates that power demand from data centers will grow 160 per cent by 2030. The electricity it is drawing from cities and countries is already a source of controversy. “Vast campuses are in the pipeline that will require huge amounts of energy, some as big as five gigawatts,” says Oxley. “We’re likely to see a small modular reactor at a data center site within five to six years, so we’re looking at those very hard already.”
As the complexities increase, some insurers expect to be involved at conception stage, particularly with construction approaches varying from modular builds to bespoke design. FM says it is already working on multiple projects from procurement stage on, overseeing designs and advising on which safety features should be built in. “What data centers are looking for right now is capacity,” says Heisel. “FM’s MFL [maximum foreseeable loss] underwriting can help them understand what their maximum exposure could be at an individual location, based on our engineers’ assessment of the construction and all aspects of the design and build.”
The temptation to scale rapidly to cope with demand and provide a swift ROI means risks are likely to rise – unless there is critical oversight from external partners. Insurers can be the ultimate backstop.
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