The global demand for AI technologies has seen a building boom take place around the world as developers scramble to build the facilities required to meet these needs, bringing with them a range of complex risks, according to a report by Allianz Commercial.

Research by McKinsey suggests that up to US$7tn (£5.3tn) will be spent on data centres by 2030, with much of that geared towards industrial scale infrastructure and dependable energy sources that AI and cloud computing demands.

Despite the ongoing expansion, several factors could limit future growth, according to Allianz Commercial, including the surging costs of construction and the need for highly specialised insurance coverage for risks such as power supply concerns, faulty workmanship, fire or natural catastrophes. Darren Tasker, head of construction, Americas, at Allianz Commercial, said: “Construction projects as complex and extensive as data centres require significant time and resources. Typically, they require project-specific policies given their size and their unique risk profile that demands specialized insurance.”

One of the main issues is the soaring power demand that threatens to outpace grid capacity and infrastructure. To avoid power issues, data centre operators are increasingly seeking to reduce their reliance on the grid by generating their own power on site, including renewables, gas, and even potentially small nuclear reactors.

Fire, heat and water are also significant risks for data centres, potentially leading to severe property damage or business interruption losses. Lithium-ion batteries are increasingly being used in server racks in data halls. The fire risk associated with these batteries is well documented, particularly in relation to electric vehicles and charging infrastructure.

Large data centres can consume up to 19m litres of water a day, equivalent to the water use of a town with a population of up to 50,000. Increasing cooling requirements will drive up water and electricity demand, while rising global temperatures pose a growing risk to the resilience of over half the world’s top data centre hubs. This has altered the risk profile of data centres and contributed to the increase in construction and insurance costs.

Tasker added: “Currently, there are no clear signs the growth in data centres has reached its peak, but there could be a check on the industry’s upward trajectory. Future demand for AI is difficult to gauge, due to rapid technological advances and various barriers to widescale roll-out. This has led some commentators to voice fears about a bubble, over-investment, and the prospect of stranded assets.”

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