Global heating is moving beyond a future environmental concern to become a present-day business reality.
For the data centre industry, the challenge is increasingly one of adaptation: understanding where exposures exist, reducing vulnerability where possible, and adopting the right insurance solutions to build long-term resilience.
Global heating: how does a changing climate affect data centres?
Historical weather patterns no longer offer a reliable guide to future climate conditions. For data centres, an increase in both the frequency and intensity of natural catastrophes, such as flooding, storms, and wildfires, can disrupt operations, increase downtime, and drive insurance and repair costs.
As data centres are typically expected to be operational for between 20 to 30 years, investors, constructors, and operators alike must begin considering how long-term weather conditions could physically impact the data centre and its prospective revenue.
A 2026 study by First Street revealed that 79% of data centre capacity (opens a new window) across the world is acutely vulnerable to severe, climate-induced weather events. Future-proofing projects to ensure resilience against a changing climate should, therefore, become an immediate priority, instead of a potentially costly afterthought.
Keeping cool: extreme heat and service outages
During prolonged periods of heat, rising temperatures will increase cooling demand in data centres. With sites possessing densely packed servers that operate continuously, substantial electricity and cooling will inevitably be required to maintain suitable operating conditions.
During extreme heat, cooling systems can be exerted towards their design limits, increasing equipment wear, maintenance requirements, and, eventually, the risk of equipment failure. Poor ventilation or insulation can exacerbate heat retention, potentially forcing operators to derate equipment and reduce capacity to maintain safe operating conditions.
Extreme heat has historically been a more prominent consideration for data centres in areas such as the Sun Belt states in the US, the Arabian Peninsula, and Southern European nations. However, as global heating reshapes weather patterns, hotter temperatures are affecting more of the world. For example, in 2022, record heat in the UK resulted in Google and Oracle briefly suffering (opens a new window) “service outages” due to “cooling systems failing” at London data centres.
Service disruption can create losses well beyond the physical damage itself. Downtime may result in lost revenue for operators via service-level agreement (SLA) credits for customers where contracted availability or performance levels are not met. Such financial penalties underline the importance of limiting business interruption via sourcing reliable grid connections, backup generation, and robust cooling and water arrangements.
How water scarcity invites risk of flooding
Flood risk is a prominent concern, particularly from intense rainfall and the threat of surface-water flooding in established European data centre hubs. This is driving greater focus on site selection, flood protection, drainage, cooling strategies, and access to resilient utilities.
Where data centres face flood exposure, elevating servers and other critical equipment above expected flood levels can be a prudent resilience measure, helping to minimise physical damage and reduce the potential for prolonged business interruption.
A majority of data centres rely on water-based cooling systems, of which a significant proportion of planned developments are located in regions already facing water stress.
In Europe, more than a third of the continent’s 3,000 data centres are in areas facing high or extremely high water stress (opens a new window). As water availability becomes an increasingly important consideration in data-centre siting, facilities may face a growing tension between securing reliable cooling resources and exposure to flood risk, particularly where development takes place near rivers or other water sources.
In the US during 2026, Meta “struggled to secure full insurance coverage” for its $30 billion Hyperion data centre (opens a new window), in part due to its location within the Louisiana Delta flood plains (opens a new window).
Businesses often deploy major capital expenditure to fund new data centres – with investment horizons spanning decades. Constructing data centres in a flood-prone area could lead to regulatory scrutiny or litigation if foreseeable climate risks were not properly assessed during the due diligence process. Consequently, senior executives may be exposed to potential directors and officers (D&O) claims.
The threats from secondary perils on energy sources
Once considered secondary perils that produce attritional losses, wildfire, tornadoes, hail, and severe convective storms are becoming some of the market's largest loss drivers.
Each data centre’s approach to energy sourcing (opens a new window) will play a critical role in the success of each site. While some sites have entered power purchase agreements (PPAs) to secure a consistent supply of power, other projects are increasingly adopting on-site generation. Renewable energy is frequently used to achieve this, with constructors installing solar panels, wind turbines, or battery energy storage systems (BESS) on or near a facility to produce low-carbon electricity directly.
While renewable energy can strengthen energy security, it also changes the risk profile of a project. The assets supporting power generation may be exposed to many of the same climate hazards affecting data centres.
For example, in March 2024, “thousands of photovoltaic cells” were severely damaged by “baseball-sized hail stones” at the 3,300 acre Fighting Jays Solar Farm in Houston, Texas, by a powerful hailstorm (opens a new window).
The widening protection gap: why data centres require tailored risk management
Insurance remains integral for management of climate-related risk.
However, with extreme weather becoming a systemic threat to many data centre projects, the insurance market is responding by applying greater scrutiny to risk quality, resilience measures, and long-term exposure. Subsequently, in some regions, this has resulted in higher premiums, larger deductibles, tighter sub-limits, and reduced capacity for the most exposed risks.
For the data centre industry, brokers and insurers regularly collaborate to devise tailored insurance solutions that can help close the protection gap. This typically involves evolution within existing insurance products, enhanced risk engineering during the planning stage of projects, and utilising alternative risk-transfer solutions to secure the right protection for each site.
Remaining resilient as the climate changes
Early engagement with the insurance market remains crucial.
Seeking specialist advice from the outset enables risks to be identified, liabilities to be understood, and the right solutions to be tailored around each data centre. The best outcomes hinge on implementing strong resilience measures which will improve underwriting confidence, access to capacity, and more favourable insurance coverage.
For data centre owners and developers, a thorough and holistic approach is increasingly critical to protecting both assets and the wider commercial model behind each project.
For further information on how we can support your data centre, please visit our Data Centres & Digital Infrastructure (opens a new window) page, or contact a member of our team.
To find out more, read our latest thematic report: Global heating: navigating a new business reality (opens a new window), which explores how a hotter world is reshaping exposures, insurability, and risk financing.
