Data Centre & Server Facility Insurance
A data centre is a building designed around its plant. The shell may be an ordinary steel framed unit, but the value sits in the cooling systems, uninterruptible power supplies, battery rooms, generators, switchgear and fire suppression that keep the server halls running, and those are the items an underwriter will want to understand first.
The interruption exposure is unusual. A modest fire, a cooling failure or a loss of mains power can stop a facility serving its customers even where the physical damage is small, and the financial consequences for the operator and its clients can be large compared with the repair bill.
Ownership of what is inside matters. In a colocation facility the servers and network equipment usually belong to the customers, while the building and critical infrastructure belong to the operator or its landlord. Each needs its own insurance, and the contracts decide who is responsible for what.
We can advise owners and operators of data centres, server rooms and edge facilities on insuring the building, the plant and the income, and on where the contractual promises made to customers sit outside insurance altogether.
Common claims and risk exposures
The exposures that produce claims in this trade, rather than a generic list.
Fire in the electrical infrastructure
Battery rooms, UPS systems, switchgear and dense cabling are common ignition points. Lithium ion batteries in particular can enter thermal runaway, and smoke and corrosive combustion products can damage equipment well beyond the area that actually burned.
Cooling failure
Chillers, computer room air handlers and the control systems that run them keep halls within operating temperatures. A failure that is not caught quickly can lead to equipment shutting down or being damaged by heat, and insurers ask how much redundancy the cooling has.
Power supply and generators
Mains failure should be bridged by UPS and then generators. Generators that do not start, fuel that has degraded in storage or a fault in the transfer switch can turn a routine outage into a full loss of service, and diesel storage on site is a fire exposure in its own right.
Suppression and water
Gas suppression and early warning smoke detection are designed to stop a fire with little collateral damage. Accidental discharge, poorly sealed rooms that let the gas escape, and water from sprinklers or cooling pipework in the wrong place all create their own losses.
Customers' equipment and expectations
Colocation customers hold expensive equipment on the premises and contracts that promise availability. When service fails, customers may claim for damage to their equipment and seek service credits or penalties, which are commercial matters rather than insured losses in most cases.
The cover we arrange
We arrange insurance around the property, its use, construction, occupancy and ownership structure. The cover available will depend on the individual risk and the terms offered by insurers.
Buildings and critical plant
The structure, raised floors, containment, cooling plant, UPS, generators, switchgear and fire suppression on a reinstatement basis. Plant values often exceed the shell, and long lead times for replacement equipment affect how claims play out.
- Building shell and data hall fit out
- Chillers, air handlers and cooling controls
- UPS, batteries, generators and switchgear
- Gas suppression and detection systems
Machinery and equipment breakdown
Sudden mechanical or electrical breakdown of chillers, UPS units, generators and transformers. Damage cover answers fire and flood, but a large part of the exposure in a data centre is failure of plant without any external cause.
- Breakdown of cooling and power plant
- Electrical damage from surges
- Expediting expenses and temporary plant
- Engineering inspection where required
Business interruption
Loss of revenue and increased costs of working after insured damage, with an indemnity period that reflects how long specialist plant takes to source and commission. Extensions for failure of public utilities can be added, usually with limits and conditions.
- Loss of revenue or gross profit
- Increased cost of working and temporary plant
- Public utility failure extension
- Indemnity period reflecting plant lead times
Customers' equipment
Colocation customers usually insure their own servers. Some operators arrange cover for customers' equipment in their care, or need liability cover for damage they cause to it; the contracts set which applies.
- Responsibility set out in colocation contracts
- Liability for damage to customers' equipment
- Customers' own insurance requirements
- Waivers of subrogation where agreed
Property owners and public liability
Injury to customers, contractors and visitors on site, and damage to third party property. Employers' liability is legally required once you employ people and can be arranged where required, subject to the policy terms.
- Customer and contractor access
- Damage to neighbouring property
- Employers' liability where required
- Limits set by customer contracts
What an underwriter will ask
Having these to hand shortens the process considerably, and usually improves the terms.
- Owner, operator or both, and whether the facility is single tenant, enterprise or colocation
- Construction of the building and any combustible cladding or roof materials
- Detection and suppression: aspirating smoke detection, gas systems, sprinklers and room integrity testing
- Cooling design and redundancy, and how quickly a failure is detected and escalated
- UPS type and battery chemistry, generator capacity, fuel storage and test regime
- Redundancy of power feeds and what happens on loss of mains supply
- Plant values, ages, maintenance contracts and lead times for replacement
- Revenue, customer contract terms and the indemnity period sought
What affects the cost of your insurance?
The main factors insurers consider when assessing the premium.
Fire protection and detection
Early warning detection and well maintained suppression with tested room integrity are central to the rating. Insurers look closely at how battery rooms and electrical plant are protected.
Redundancy of power and cooling
Facilities with duplicated feeds, generators and cooling paths limit the chance that a single failure stops the site, which helps both the damage and interruption terms.
Plant values and lead times
High value plant with long replacement times increases both the sums insured and the indemnity period needed, and the premium reflects the cost of a long outage.
Customer profile
A facility serving many colocation customers, with contractual obligations to each, presents a different liability and interruption profile from a private server facility used by a single business.
Conditions and exclusions to consider
Terms vary between insurers, so treat these as the questions to ask rather than a description of any one policy.
Service level credits and penalties
Contractual promises of availability and the credits or penalties paid when they are missed are generally uninsured. A property policy answers physical damage and its consequences, and business interruption cover is measured on the insured's own loss of revenue, not refunds promised under contract.
Cyber events
Most property policies exclude loss caused by malicious code, hacking or system failure without physical damage. Cyber insurance is a separate product and should be considered alongside the property cover.
Utility failure without an extension
Loss caused by an off site power failure is not covered under ordinary business interruption, which needs damage at the insured premises. An extension is needed, and some wordings limit or exclude failure of overhead transmission and distribution lines.
Wear, corrosion and untested systems
Gradual deterioration of batteries, plant and pipework is a maintenance matter. Generators and suppression systems that have not been tested in line with the maintenance regime may give insurers grounds to dispute a claim.
Common questions
Who insures the servers in a colocation facility?
Usually the customers who own them. The operator insures the building, the plant and its own income, and needs liability cover in case it damages customers' equipment. The colocation agreement should state where responsibility sits, and both sides should check their insurance matches it.
Will insurance pay our service credits to customers?
Generally no. Service credits and contractual penalties are commercial commitments. Insurance may cover the operator's own loss of revenue after physical damage, but not the refunds or credits it has promised under contract.
Are we covered if the grid fails and the generators do not start?
Only if the policy includes a public utility extension, and even then subject to its limits and conditions. Generator failure may be a breakdown claim, but insurers will ask about the testing regime, and lost revenue from an off site outage needs specific cover.
Does gas suppression reduce the premium?
A properly designed, maintained and tested system is viewed positively, and many insurers expect one in data halls. Room integrity testing matters, because a gas system in a room that leaks may not hold its concentration long enough to suppress a fire.
We run a server room inside our offices. Is this page relevant?
Partly. A small server room is normally insured as part of the business's office and computer cover, but the same questions about suppression, cooling, power and interruption apply in proportion to how much the business depends on it.
How do I get a quote from True Risk Solutions?
Call 01304 262880 and speak to a broker, or email info@truerisksolutions.co.uk with what you do, what you need cover for and a phone number with the best time to call, and a broker will call you back. We need a phone number to quote, because the cover and the price depend on questions that are quicker to answer on a call than by email.
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Speak to a specialist who understands your industry
Tell us about your business and the work you undertake, and we will come back to you with cover options built around it. Call 01304 262880, or email us with a phone number and the best time to call and a broker will ring you back.