Data centres are a hot topic at the moment. They form the backbone of so many aspects of our economy and our daily lives, perhaps without us even realising. As part and parcel of the imminent roll out of automated vehicles (AVs) in the UK and the vast quantities of data AVs will produce, data centres will be integral to the story.

They are buildings which contain large numbers of computer servers and storage systems that power all types of digital services: much of the internet, apps, email systems, as well as artificial intelligence and, of course, for storing data. There are currently about 568 data centres in the UK (the number is increasing all the time) which range in size from smaller centres for a single organisation to vast hyperscale data centres, typically owned and operated by technology giants like Amazon, Google and Microsoft. In the UK, data centres are designated Critical National Infrastructure (CNI) and are formally recognised by the Government as vital to the economy and the national interest.

It is the hyperscale data centres that get the most attention in the press and with local communities where they are built (or proposed), due to their colossal size. For example, a hyperscale data centre planned for Auchtertool if Fife would have footprint of up to 60 hectares (about 84 football pitches) and be up 35 metres high (equivalent to an 11-storey building).

Their physical size is far from the only consideration: two key demands of data centres are the electricity needed to power them, and the water for cooling systems to prevent them from overheating.

A typical hyperscale data centre needs a continuous power supply of around 100-500 MW or more – at the lower end that is 2.4 GWh of electricity every 24 hours, the equivalent of around 85,000 homes! By any measure that is an awful lot of electricity. That same data centre will also typically need between 3.8-19 million litres of water per day to keep everything cool – the same consumption as a small town of 10,000-50,000 people.

It is therefore obvious that these large data centres often prove to be controversial in terms of where they are and how much energy and water is needed to keep them going once built, against the backdrop of making energy production more sustainable – the shift to renewables, particularly in the UK – and climate change which has (certainly in 2026) led to drought conditions across much of England and Wales.

To mitigate against concerns typically raised about energy and water use, developers of data centres are often keen to explore powering them from renewable energy sources such as wind and solar, combined with battery energy storage systems (BESS). In Scotland, for instance, there is a surplus of renewable energy which makes it an attractive location for new hyperscale data centres – although the majority of data centres in the UK are actually still concentrated in London and the south east.

And since data centres are always 'on' and need a constant power supply 24/7 – which is not compatible with most large scale renewable energy supplies which depend on daylight and the wind blowing – this is helping to drive the expansion of BESS. For instance, the Coalburn 1 site in South Lanarkshire in Scotland recently claimed the crown for the largest operational BESS in Europe (the first of three 1GWh sites in Scotland).

Cooling systems that do not rely on water at all, such as air cooling, or by recycling the water in closed-loop systems, are being developed. An interesting (and beneficial from a local perspective) development is by using the water heated from a data centre for community heating projects – the Old Oak and Park Royal scheme in London being a good example, which is anticipated (once complete) to heat up to 25,000 homes. The principle is the same as for large scale geothermal projects such as those in Iceland, which heats 90% of its homes thanks to its location atop the mid-Atlantic ridge thanks to the volcanic heat produced.

The controversial nature of data centres is perfectly illustrated by the fact the Scottish Government is contemplating a freeze on all new hyperscale data centres being built in Scotland, after the SNP's national council passed a motion to do so in July 2026. If this is approved by Holyrood, it could significantly impact the development of the 24 centres currently planned in Scotland.

It goes without saying that data centres are potentially rather risky assets to insure, from a variety of different angles – not just the physical aspects of them but also the digital impact any outage may have, and the security of the data contained in and processed by them. The fact they have CNI status alone confirms this. Risks include: power outages, water scarcity which could affect cooling systems, fires, impacts from extreme weather events and cyber-attacks.

However, there are a number of things insurers can do to mitigate against these risks:

• robust underwriting standards as a condition of providing cover,
• risk assessing power demands, insisting on back-up on-site power generation such as battery storage,
• ensuring enhanced fire suppression systems are in place that are checked regularly,
• and by requiring compliance with National Cyber Security Centre guidance.

Also, if an insurer insures multiple data centres, by mapping exposure and seeking to avoid a portfolio that is concentrated in any particular geographic location – this can help to manage claims from single events such as a power failure, flood or heatwave.

The upcoming roll-out of AVs will generate vast amounts of data and this is all going to have be stored somewhere. Data centres will therefore be required to cater to this need. Whilst data centres have CNI status that does not make them immune to public, environmental and social concerns. There can be some lesser known upsides to data centres such as community heating projects, but it is likely that data centres will continue to prove to be controversial.

When it comes to future climate resilience this isn't just about protecting homes and businesses from extreme weather events. As we become more reliant on digital infrastructure it is also about ensuring the critical services that underpin the economy can continue to function when these events occur – data centres are a good example of this challenge. Insurers have an important role to play in transferring risk but also in encouraging resilient design, risk management and implementing measures that enable data centres to withstand the impacts of climate change.

So, whilst insurers need to be mindful of the risks of providing cover for data centres, there are many things they can do to mitigate against those risks and, in doing so, support the wider goal of building climate resilience.