Construction Industry Faces Rising Insurance Risks Amid Data Center Boom and Labor Shortages

The global construction sector is undergoing rapid transformation as the demand for data centers accelerates, largely fueled by technological advancements and the growing infrastructure needs of artificial intelligence. However, this surge comes with major challenges. A significant shortage of skilled labor is impacting project timelines and quality, particularly in North America, where an estimated 500,000 additional workers are needed. Similar labor constraints are affecting Europe, Asia, and Latin America, driving up costs and forcing contractors to rely on less experienced workers.

Insurers are closely monitoring these trends, reassessing risks tied to cost projections, project timelines, and construction quality. According to WTW’s Global Construction Rate Trend Report for Q1, insurance premiums are climbing as material costs remain elevated due to ongoing supply chain disruptions and trade tariffs. Weather-related claims are also on the rise, emphasizing the role of climate risk in underwriting decisions. In 2024 alone, severe weather events triggered a record volume of property damage claims, signaling a shift in risk exposure for insurers.

Regionally, market dynamics vary. In Asia and Australia, investment in infrastructure and affordable housing continues, while Europe focuses on sustainability despite labor shortages. The U.S. faces added pressure from catastrophic events like the Los Angeles wildfires, which may generate insured losses of up to $40 billion. These events are straining material and labor supply, potentially driving further insurance rate hikes.

At the same time, construction is becoming more reliant on digital systems, prompting insurers to revise cyber liability coverage. Cyber risks, especially those with the potential to cause property damage or bodily injury, are receiving heightened scrutiny. As the sector evolves, especially with energy and data center investments on the rise, insurers are calling for detailed risk data and robust underwriting information to manage emerging exposures effectively.