COLORADO SPRINGS, Colorado — Billions of dollars in data center construction are generating significant insurance demand, but a growing challenge for insurers is the accumulation of exposures rather than a broad shortage of capacity, insurance executives say.

Most projects can obtain the property and builders risk capacity they need, but insurers and reinsurers must track overlapping construction, operational property, equipment and power exposures, they said.

The executives spoke in early October at the Insurance Leadership Forum, sponsored by the Council of Insurance Agents & Brokers. The annual event brings senior executives from brokerages, insurers and other insurance-related companies to The Broadmoor resort at the foot of the Rocky Mountains, where they hold numerous individual meetings.

The data center boom has sparked public opposition in some states over concerns about electricity and water use and the effect on local communities, prompting proposals to restrict or pause some developments. Despite the pushback, insurance executives at the conference generally described data centers as a major growth opportunity for the industry.

Thousands of data centers are expected to be developed globally, with many projects valued between $3 billion and $5 billion, said Ryan Barber, New York-based global head of property at Aon.

There is ample capacity for projects of that size, which are generally highly engineered and attractive property risks, he said.

“We’ve done placements now with limits as high as $8.5 billion, and that was over a year ago; we could probably do placements in excess of $10 billion now,” Mr. Barber said.

Aon is developing an operational property insurance facility for data centers.

Aon estimates data centers could generate more than $100 billion in new insurance premiums over the next five to 10 years, he said.

But rapid development is creating accumulation issues as large campuses are built in phases, leaving insurers with builders risk and operational property exposures at the same site, Mr. Barber said. Other exposures can include high-value computer equipment and dedicated power generation, increasing the potential for insurers and reinsurers to accumulate exposures to the same projects.

“The biggest struggle right now for insurers and reinsurers, for that matter, is to just track and understand the accumulation of risk that they’re taking on from these data centers,” Mr. Barber said.

Managing aggregation is also an important consideration in site and insurer selection, said Pat Donnelly, Chicago-based head of risk and broking for North America at Willis.

Some insurers can provide coverage across several phases of a development, while others prefer individual segments, he said.

Insurers must consider those exposures alongside property risks already on their books, said Marc Orloff, Boston-based president of global risk solutions North America at Liberty Mutual.

“We all write a lot of property already … so it’s all about managing tolerances. How much of our exposure do we want? How much volatility do we want on our balance sheets?” he said.

Concentrations of expensive data centers in areas exposed to severe convective storms add to the uncertainty, Mr. Orloff said.

Property and business interruption capacity remains plentiful for most projects, but capacity in other lines is more constrained, said Marc Kunney, San Francisco-based chief client officer at EPIC Insurance Brokers & Consultants.

“Where some of the challenges are is on the professional liability, which is a much more limited marketplace,” Mr. Kunney said.

The construction boom is generating substantial premium, but not all of the revenue will recur once projects are completed, Mr. Orloff said. Operational property coverage may generate lower premium volumes, while builders risk premium will decline if construction slows, he said.

“It’s not a recurring revenue stream,” Mr. Orloff said.

AI exclusions struggle to gain traction in market

Insurance policy exclusions targeting artificial intelligence risks are struggling to gain traction as brokers and policyholders resist broad restrictions on a technology that is increasingly embedded in everyday business operations.

AI exclusions have emerged as the industry grapples with potential liabilities associated with the technology, but several insurance industry executives said the market is generally seeking to address the exposures through underwriting rather than broad exclusions.

The executives spoke at the Insurance Leadership Forum, sponsored by the Council of Insurance Agents & Brokers.

AI exclusions are not gaining widespread acceptance among policyholders, said Marc Kunney, San Francisco-based chief client officer at EPIC Insurance Brokers & Consultants.

“AI isn’t the risk per se. AI is an acceleration or augmentation of the delivery, and so it’s really hard to exclude AI,” he said. “Every organization, every industry is using AI, so if you have an AI-related exclusion, what’s going to be covered?” Mr. Kunney said.

Some insurers have introduced affirmative AI coverage, but those policies should be examined closely because they can function as “cloaked exclusions,” specifying which AI-related perils are covered while excluding others, he said.

Pat Donnelly, Chicago-based head of risk and broking for North America at Willis, said he has not yet seen AI exclusions become prevalent in placements. Broad exclusions could be difficult to apply because AI is already integrated into many business activities, he said.

“AI is too embedded,” Mr. Donnelly said.

ISO, the insurance industry standards organization, filed optional general liability exclusions addressing generative AI exposures last year.

The exclusions appear more likely to be adopted by smaller insurers that routinely use ISO forms, said Alex Wells, CEO of Zurich U.S.

“I think those are generally only being adopted by smaller carriers who automatically adopt things that ISO does,” he said.

Zurich has reviewed the endorsements but does not use blanket AI exclusions, Mr. Wells said.

“We prefer to think about AI as an underwriting question rather than a contract question,” he said, noting there is a difference between companies that use AI for their own operations and those developing AI services and products.

As case law develops around AI, the insurance coverage issues may evolve, Mr. Wells said.

Shawn Ram, chief revenue officer at cyber insurer Coalition, said he has seen numerous AI exclusions filed but not widely adopted. Some brokers have told Coalition they would move business if insurers imposed the restrictions, he said.

Insurers may also be reluctant to be among the first to impose an exclusion that could put them at a competitive disadvantage, Mr. Ram said. Coalition has affirmative AI coverage in its policies.

“In 2024, we announced that we are affirmatively covering AI exposures. We’ve only expanded that since then,” he said.