Artificial intelligence is no longer a future concept – it is a powerful and immediate driver of electricity demand and capital investment across North America. As AI workloads accelerate, the rapid expansion of data centers and supporting power infrastructure is reshaping energy markets and materially increasing the replacement values and risk profiles of these highly specialized assets.
For owners, operators, and insurers, a critical question emerges: Do current insured values still reflect today’s construction realities?
AI’s Energy Appetite Is Accelerating Infrastructure Growth
AI-focused data centers consume significantly more power than traditional computing facilities. High-density servers, advanced GPUs, and intensive cooling systems have driven electricity demand far beyond historical norms.
Across North America, data centers already represent a meaningful share of total electricity consumption, and that share is rising quickly. Utilities, regulators, and private developers are responding with new generation capacity, expanded transmission systems, substations, and grid reinforcements – many of which are being planned and built at unprecedented speed and scale.
This growth is highly concentrated in key markets:
- In the United States, regions such as Northern Virginia, Texas, the Midwest, and the Pacific Northwest are experiencing rapid data center clustering.
- In Canada, expansion is most visible in Ontario, Quebec, Alberta, and British Columbia, where access to power, fiber, and favorable climates is driving new development.
While this investment surge supports digital growth, it also creates significant upward pressure on construction and replacement costs.
Construction Costs Are Rising – And They’re Not Static
AI-driven data centers differ fundamentally from conventional industrial or commercial buildings. They require exceptionally high electrical capacity and redundancy, sophisticated mechanical and cooling systems, specialized transformers and switchgear, and extended commissioning periods.
Power generation and grid infrastructure face similar pressures, including equipment scarcity, labor constraints, and longer procurement timelines. Across the U.S. and Canada, construction costs are increasing due to:
- Escalating prices for electrical equipment, steel, copper, and mechanical systems
- Extended lead times for critical components
- Higher labor costs for specialized trades
- Increasing regulatory, environmental, and interconnection requirements
These cost increases are not uniform. Local demand surges and supply-chain constraints can significantly affect replacement values depending on asset location.
Regional Variations Matter – For Risk and Valuation
United States
In major data center corridors, intense competition for skilled labor and equipment is pushing electrical and mechanical costs well above national construction averages. Facilities in these regions often face accelerated replacement cost inflation, particularly for power-related components.
Canada
Canadian markets experience similar pressures, with additional considerations such as reliance on imported specialized equipment, currency fluctuations, and regional differences in utility capacity and labor availability. Replacement costs can rise rapidly in growth markets even when national construction inflation appears moderate.
These dynamics highlight the risk of relying on generic indices or outdated appraisals.
For insurers and asset owners alike, these regional dynamics underscore why generic cost indices or outdated appraisals can leave significant gaps in coverage.
The Growing Risk of Underinsurance
As construction costs escalate, replacement cost values can become outdated faster than anticipated – especially for data centers and power generation assets. Underinsurance risk is increasing due to:
- Rapid escalation in electrical and mechanical system costs
- Higher power-density design standards
- Longer rebuild timelines that amplify cost inflation exposure
- Greater interdependence between facilities and grid infrastructure
Following a major loss, inadequate insurance limits can result in unfunded reconstruction costs, delays in restoring critical infrastructure, valuation disputes, and financial strain for owners and operators. For insurers, outdated values can distort risk modeling, premium adequacy, and loss expectations.
Why Current Insurance Appraisals Matter More Than Ever
A current, independent insurance appraisal provides a reliable, defensible estimate of replacement cost based on today’s construction environment – not yesterday’s assumptions.
For data centers and power generation facilities, a proper appraisal should reflect:
- Current material and labor pricing by region
- Specialized equipment and long-lead items
- Escalation during extended reconstruction periods
- Changes in design standards and power density
- Site-specific and regulatory considerations
Regularly updated appraisals help ensure:
- Adequate insurance limits
- Reduced underinsurance risk
- Greater certainty in loss recovery
- Stronger alignment between owners and insurers
A Changing Landscape Requires Updated Valuations
AI is accelerating infrastructure development at a pace rarely seen in the energy or construction sectors. As data centers and power generation facilities grow larger, more complex, and more expensive to rebuild, replacement cost risk becomes a strategic issue – not an administrative one.
For owners, operators, and insurers across the United States and Canada, now is the time to reassess whether insured values still reflect reality. In a market defined by rapid cost escalation and regional variability, current insurance appraisals are a critical tool for protecting capital, managing risk, and ensuring resilience.
Managing Risk in a Rapidly Changing Landscape
AI is accelerating infrastructure development at a pace rarely seen in the energy or construction sectors. As facilities grow larger, more complex, and more expensive to rebuild, replacement cost risk has become a strategic issue rather than an administrative one.
Suncorp Valuations supports asset owners and insurers with independent replacement cost appraisals backed by regional offices across North America and a team of highly qualified professionals specializing in power generation, transmission, distribution, and mission-critical infrastructure. By combining local market insight with deep technical expertise, Suncorp helps ensure insured values reflect current construction realities, regional cost pressures, and the growing complexity of AI-driven assets.
As infrastructure investment continues to accelerate, proactively reassessing insured values can reduce uncertainty, improve coverage alignment, and strengthen resilience in an increasingly power-intensive economy.