• New analysis from MS Amlin reveals growing natural catastrophe risk as US data centre development shifts south
• Over $600bn of planned data centre investment set for US states highly exposed to tornadoes, large hail and severe storms
• Insurer says accelerating AI investment demands more advanced aggregation risk management.
• MS Amlin has developed an industry-leading database to monitor data centre exposures across its portfolios and lines of business

More than half (51%) of planned US data centre projects worth $670bn are being built in states at high risk of severe convective storms (SCS), according to research by specialty Lloyd’s insurer MS Amlin.

The analysis of more than 670 data centre projects under construction or planned across the US found 320 facilities located in states classified as being at high risk of tornadoes, large hail and damaging winds.

Existing data centres in high-risk states for SCS are valued at almost $20bn, the study found, suggesting that future AI infrastructure in storm-exposed regions could be nearly 40 times the value of existing facilities.

SCS has 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.  Swiss Re reports insured losses from such storms have grown by roughly 8% a year since 2008.

MS Amlin’s analysis found:

• Overall, 56% of 670 planned US data centres – representing nearly $800bn in investment – are in states highly exposed to either hurricanes, severe convective storms, earthquakes or winterstorms.
• Some 27% of data centres, representing $440bn, are planned for states at high risk of winterstorm, 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.

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. 

Martin Burke, MS Amlin’s Chief Underwriting Officer, said: “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 specialty insurance market, but the risks must be properly managed and understood.”

Data centres are typically insured through multiple business lines including property, cyber and credit and political risk. Without careful oversight, insurers can unknowingly accumulate exposure to the same facility across multiple policies. 

To address the risk, MS Amlin has developed a proprietary aggregation monitoring database to track data centre exposures across its underwriting portfolios.

Burke added: “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. 

“Our proprietary database of hundreds of US data centre projects lets us capture the risk not just from tightly clustered facilities but also from supporting infrastructure like power generation. This provides a far more accurate picture of overall exposure. “This visibility allows us to deploy capacity responsibly to support the sector’s growth while maintaining underwriting discipline.  The ability to monitor aggregation risk is becoming increasingly important as this class continues to grow.”

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