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Data centers are among the fastest-growing areas in the U.S. construction sector, fueled by massive investments in artificial intelligence. These and other trends are accelerating data center construction projects, and along with them, a wide range of property and liability risks. This white paper explores the boom in data center development and operations through a risk management lens and offers recommendations for project owners, operators, developers, contractors, and insurance brokers.

As data centers look for greater power resilience and operational flexibility, Battery Energy Storage Systems (BESS) are being implemented in many projects currently under construction, most often those using lithium-ion cells. These systems can improve reliability and drive cost savings, but they also introduce new, complex hazards including the risk of thermal runaway. In a thermal runaway event, a battery cell’s temperature escalates uncontrollably, quickly spreading heat and potentially causing fire, toxic gas release, or even explosions. A single failure in a densely packed data center environment can put the whole facility at risk.

Data center development is expanding into rural locations driven by lower land costs and access to renewable energy, requiring construction teams to address challenges around workforce availability. An inability to properly staff projects with a specialized & skilled labor force can harm project schedules and increase costs, with direct implications for Builders Risk insurance.