According to research by MS Amlin, 51% of planned US data centres are being built in in states at high risk of severe convective storms
Analysis of more than 670 US data centre projects under construction or planned found 320 facilities in states classified as at high risk of tornadoes, large hail, and damaging winds.
The research found that existing data centres in high-risk states for severe convective storms (SCS) are valued at almost $20bn, suggesting that future AI infrastructure in storm-exposed regions could be nearly 40 times the value of existing facilities.
Costly risks of severe connective storms
SCS have become a major driver of insured losses. Last year, SCS events generated $52bn in insured losses in the US – making it the costliest region and peril globally.
Moreover, Swiss Re reports insured losses from such storms have grown by roughly 8% a year since 2008.
The findings underline the scale of investment flowing into states at risk of natural catastrophes as development of new hyperscale facilities shifts to southern regions where land and power are more favourable.
Risks to US data centre projects need to be properly managed
MS Amlin’s analysis found:
- Overall, 51% of 670 planned US data centres – representing nearly $800bn in investment – are in states highly exposed to either hurricanes, severe convective storms, earthquakes or winter storms.
- Some 27% of data centres, representing $440bn, are planned for states at high risk of winter storms, which can disrupt power networks and create complex business interruption risks.
- Nearly a quarter (21%) of planned data centres – amounting to $340bn of investment – are located in US states at high risk of hurricanes.
- Data centres in high-risk earthquake states account for 3% and $12bn of planned facilities.
Martin Burke, MS Amlin’s chief underwriting officer, explained: “These numbers highlight both the opportunity and the risk. Hundreds of billions of dollars of new digital infrastructure are being directed towards regions at higher risk of potentially destructive severe convective storms.
“When assets of this scale cluster in hazard-prone regions, the potential loss severity from a single storm event can rise very quickly. This is a growth opportunity for the speciality insurance market, but the risks must be properly managed and understood.”
Careful oversight of insurance policies
Data centres are typically insured through multiple business lines, including property, cyber, credit and political risk.
Without careful oversight, insurers can unknowingly accumulate exposure to the same facility across multiple policies.
“As AI investment accelerates, insurers must adopt more advanced ways to manage aggregation risk. If the industry is slow to address this challenge, it could restrict the deployment of capital and roll out of AI infrastructure,” Burke concluded.
The post Half of US data centres being built in states at high risk of destructive storms appeared first on Planning, Building & Construction Today.
