The Space Data Center Boom is Creating a New Insurance Problem

Data centers in space could create a new market for insurers as companies including SpaceX and Blue Origin pursue plans to move computing infrastructure into orbit, but insurers face major challenges in assessing and pricing risks that have never existed at scale.

SpaceX has laid out one of the most ambitious visions. In January, the company filed with the U.S. Federal Communications Commission for a constellation of up to 1 million satellites that could form an orbital artificial intelligence data center.

CEO Elon Musk has argued that solar-powered computing in space could become cheaper than terrestrial data centers within two to three years as launch costs decline and the cost of adding power on Earth rises.

Jeff Bezos is also betting on orbital computing, though on a longer timeline. His space technology company Blue Origin filed plans in March for 51,600 data-center satellites in low Earth orbit.

Bezos said in May that data centers in space are “very realistic,” but called a two- to three-year timeline “a little ambitious.”

Google is exploring Project Suncatcher, an interconnected network of solar-powered satellites using its AI chips, while startup Starcloud has already flown an Nvidia H100 GPU in orbit.

If such plans result in hundreds of billions of dollars of hardware being deployed in space, insurance would become an important part of the equation.

“If you’re an insurer and you’re just writing terrestrial assets, and you’re not looking at space as kind of the next frontier for insurance underwriting, you’re going to miss out on a big growth story,” Patton Kline, Marsh U.S. aviation and space practice leader, told CNBC in an interview.

Insurers and their clients are already showing interest, Kline said. About 30 insurers worldwide specialize in space coverage, with annual premiums currently totaling roughly $500 million to $750 million, he said.

That is a fraction of the insurance capacity that could be required to cover hundreds of billions of dollars of orbital computing infrastructure.

Kline said orbital computing could extend a space insurance market that has covered launches and satellites for decades. It could also provide insurers with risks that are largely uncorrelated with hurricanes, earthquakes and other terrestrial catastrophes.

But scaling the market to cover orbital data centers presents significant challenges.

Andreas Berger, group CEO of global reinsurer Swiss Re, said the concept combines two fast-growing risks, AI infrastructure and commercial space, while raising fundamental questions about regulation, insurance capacity and pricing.

“There are too many unknowns to quantify the risk with enough confidence to support a sustainable insurance proposition,” Berger said.

An insurance CEO who asked not to be named offered a more blunt assessment.

“This is insane,” the executive said, citing a lack of regulation, insufficient capital and no reliable ability to model the risk in what he described as “the Wild West” of space.

The technical uncertainties are substantial. Orbital data centers would face risks including launch failures, radiation, hardware breakdowns, heat-management challenges, collisions and space debris.

Unlike terrestrial data centers, repairs or replacement of equipment in orbit could require another launch, potentially adding significant costs and extending downtime.

For insurers, the emerging sector presents both a challenge and an opportunity. If computing moves into orbit, a new multibillion-dollar class of assets could emerge.

But before insurers can cover an orbital data-center boom, they may have to develop new methods for assessing and pricing risks that have no established track record.

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