Insurers have key role as LatAm’s data centre boom brings complex risks: Allianz

As Latin America emerges as a key global hub for data centres, the scale and speed of investment are creating complex construction and operational risks. Allianz Commercial’s Priscilla Pazmino-Vitela and Ivan Coronado explain insurers’ critical role in this process.

Key points:
LatAm emerges as data centre hub
Energy requirements need investment
Complex risks means underwriting challenge

Latin America is rapidly establishing itself as the next major growth zone for global digital infrastructure. Record levels of investment are flowing into data centres across the region, driven by surging demand for cloud services, artificial intelligence and e-commerce platforms. 

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Countries including Brazil, Mexico, Colombia and Argentina are increasingly being viewed as strategic digital hubs, offering scale, connectivity and access to growing consumer markets.

But while the opportunity is clear, the infrastructure that has underpinned the region’s economy until now was not designed for the energy and resilience demands of modern data centres. For insurers and reinsurers, this combination of large, complex construction projects and evolving operational exposures presents both a challenge and a chance to add value.

“So we are seeing Latin America merge to the next digital growth zone,” said Priscilla Pazmino-Vitela, head of natural resources for the Americas at Allianz Commercial. She noted that investment in data centres reflects a fundamental shift in how businesses and consumers operate, but warned that the pace of development is placing unprecedented pressure on energy and water resources.

Modern data centres, Pazmino-Vitela explained, can consume as much electricity as a small city and require millions of litres of water each day for cooling. “The challenge is building fast enough to capture that opportunity, but also to ensure the infrastructure is resilient and sustainable for the long term,” she said.

Investing in the future

Thus energy planning has become a central issue. Governments and utilities across the region face the task of modernising grids, expanding renewable generation and strengthening transmission infrastructure, often under tight timeframes. Pazmino-Vitela stressed that sustainability must be embedded from the outset, rather than treated as an afterthought, with resilience in power supply a critical factor in operational continuity.

Grid capacity varies widely across Latin America. Brazil benefits from relatively robust infrastructure in certain regions, while Mexico’s grid is under strain from a combination of industrial growth and data centre expansion. In smaller markets, the gap between demand and capacity is even more pronounced. As a result, operators are increasingly turning to behind-the-meter solutions, including microgrids, solar and wind generation, battery storage and, potentially, small modular nuclear reactors in the future.

Water availability is another emerging risk factor. As data centres scale up, water-intensive cooling systems can create operational challenges and social tensions, particularly in regions already experiencing water stress, such as parts of Mexico, northern Brazil and Argentina. 

Climate change adds further complexity, with heatwaves, droughts, floods and wildfires all capable of disrupting operations.

Against this backdrop, construction risk is becoming more intricate. Ivan Coronado, executive underwriter for natural resources and construction at Allianz Commercial LatAm, said the construction industry is under significant pressure as developers attempt to deliver highly specialised facilities on compressed timelines.

“These are not typical construction buildings,” Coronado said, pointing to the use of specialised equipment, multidisciplinary teams and increasingly aggressive delivery schedules. Projects that would traditionally take 24 to 30 months are now being pushed to completion in as little as 15 to 18 months, heightening the risk of delays, supply-chain bottlenecks and quality issues.

Evolving risks

The shift towards modular construction and off-site assembly is helping to accelerate delivery, but it also introduces new coordination and logistics challenges. Long lead-time equipment, complex transportation requirements and the integration of hardware and software systems all create potential points of failure.

External factors, including weather events, political instability and regulatory changes, further complicate project execution.

One of the most vulnerable phases, Pazmino-Vitela added, is the transition from construction to operation. Energy systems must come online, cooling calibrated and full-load performance demonstrated, often while construction work is still ongoing. Delays in grid connection can leave completed facilities unable to operate for months, creating significant financial exposure.

From an underwriting perspective, these risks demand a more holistic approach. Coronado said insurers are increasingly being asked to provide integrated, multi-year programmes that span early works, construction and the first year of operation. This reflects the interconnected nature of data centre risks, where power, cooling, cyber exposure and business continuity are tightly linked.

The growth in data centre investment is being driven by a combination of geographic, economic and policy factors. Mexico’s proximity to the US and its role as a bridge between North and South America make it particularly attractive, while Colombia and Brazil offer access to renewable energy sources that align with the sustainability goals of major technology companies. Argentina, meanwhile, is benefiting from improved financial stability, regulatory reforms and government incentives that are supporting large-scale infrastructure development.

“The global competition for digital infrastructure is not only about speed. It’s also about doing it in an intelligent way.”

For insurers, the opportunity lies not just in providing capacity, but in partnering with developers, operators and contractors to improve outcomes. Coronado emphasised the importance of investing in training programmes to build the skilled workforce required for both construction and operation, as well as developing regional standards tailored to Latin American conditions.

“The global competition for digital infrastructure is not only about speed,” he said. “It’s also about doing it in an intelligent way.”

As Latin America’s digital transformation gathers momentum, the insurance industry has a critical role to play in enabling sustainable growth. By engaging early, understanding the full ecosystem of risks and fostering collaboration across stakeholders, insurers can help ensure the region’s data centre boom delivers long-term resilience alongside rapid expansion.

They can be contact at priscilla.pazmino-vitela@agcs.allianz.com and ivan.coronado@agcs.allianz.com.

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