A New Risk Landscape for AI Infrastructure
Escalating tensions involving Iran—including maritime incidents affecting oil transport and alleged cyber and physical targeting of digital infrastructure in the Middle East—highlight a growing and underappreciated risk for AI-driven data centers: disruption that originates far beyond the insured’s own operations. These developments are not occurring in a vacuum. They come at a time when hyperscale data center expansion has become a central driver of economic growth in the United States, as well as a national security priority, underpinning everything from cloud computing to artificial intelligence development.
If geopolitical instability continues to disrupt the energy and infrastructure inputs that support these facilities, the implications could be significant for the growing list of companies dependent on the data center boom as key source of revenue and growth. For such companies, this raises a critical question: when disruption is caused by conflict abroad, does insurance coverage follow?
This question builds on themes explored in our prior analysis of the evolving risk landscape for AI infrastructure,[1] where we noted that data centers present a unique convergence of operational, cyber, and supply chain dependencies. What is emerging now is a more complex—and potentially systemic—risk: losses driven not by damage to the data center itself, but by cascading effects from geopolitical events impacting third-party infrastructure.
From Tankers to Data Centers: How Indirect Disruption Occurs
Consider a straightforward—but increasingly realistic—scenario. A tanker transporting oil through a key shipping corridor is damaged by a mine amid regional conflict. The resulting disruption constrains fuel supply to power generation facilities, leading to instability or curtailment in the electrical grid. A data center is forced to suspend operations due to insufficient or unreliable power. The physical loss to a downstream indirect supplier causes an immediate and substantial impact on the data center construction or operations.
Modern data centers are highly sensitive to precisely this type of disruption. Their continuous operations depend on stable energy supply, cooling systems, and transmission infrastructure—all of which are deeply embedded in global supply chains that may be affected by geopolitical events. As a result, even localized incidents abroad can have far-reaching operational consequences.
Service Interruption and Contingent BI as Coverage Pathways
In these circumstances, policyholders must look to two critical components of their property programs: service interruption coverage and contingent business interruption (“CBI”) coverage. These provisions are designed to address indirect losses, extending coverage where the insured’s operations are impaired by damage to third-party property.
Applied to the scenario above, coverage may be triggered where there is direct physical damage to upstream infrastructure—such as a tanker, port facility, pipeline, or power generation asset—even if the insured’s own property remains intact. The key battlegrounds in these claims are likely to be the scope of covered “dependent property,” as many policies limit coverage for damage to downstream suppliers. Therefore, the degree of causal connection required between the initial damage and the insured’s loss may be critical.
Specifically, Insurers often attempt to deny or limit coverage for contingent business interruption or service interruption losses based on how “direct” the relationship is between the policyholder and the impacted supplier. Policyholders, however, often have strong arguments—depending on the policy language—that coverage extends to functionally critical infrastructure within the supply chain, even where multiple steps removed. In a highly interconnected system like energy distribution, limiting coverage to direct” relationships may render these provisions illusory.
State-Sponsored Cyber and the Attribution Problem
The analysis becomes even more complex where cyber operations are involved. Recent reporting suggests that data centers themselves may be targets of state-linked cyber activity, reflecting the strategic importance of AI infrastructure. These incidents blur the line between traditional cyber risk and geopolitical conflict.
Many policies, however, remain ambiguous as to whether state-sponsored cyberattacks fall within war exclusions, cyber exclusions, or neither. Attribution presents a significant hurdle for insurers, particularly where attacks are routed through non-state actors or obscured through technical means. Absent clear policy language, these uncertainties create meaningful opportunities for policyholders to resist categorical denials based on alleged sovereign involvement.
Positioning for Coverage in a Geopolitical Risk Environment
Against this backdrop, policyholders involved in datacenter development and operation should take a proactive approach to insurance coverage. This includes ensuring that service interruption and CBI provisions are sufficiently broad to capture real-world supply chain dependencies, as well as carefully evaluating war and cyber exclusions for gaps, ambiguities, and potential carve-backs.
Equally important, policyholders should be prepared to frame claims strategically. In complex, multi-step disruption scenarios, early attention to how the loss is characterized—both in terms of causation and the nature of the triggering event—can materially impact coverage outcomes. Insurers are likely to test the boundaries of these provisions, particularly in novel geopolitical contexts, and policyholders should be prepared to push back.
Looking Ahead
The intersection of AI infrastructure and geopolitical instability represents a new frontier for insurance coverage. As data centers become foundational not only to technological advancement but to broader economic growth, they are increasingly exposed to risks that originate far outside their physical footprint.
For policyholders, the takeaway is clear: these risks are no longer hypothetical, and neither is the potential for coverage. Where policies are properly structured—and claims are thoughtfully presented—service interruption and contingent business interruption coverage may provide meaningful protection against the cascading effects of modern geopolitical conflict.
[1] https://www.propolicyholder.com/2025/07/the-new-frontier-data-centers-ai-insurance-implications/