Data Centre Insurance Malaysia

Malaysia's data centre market is one of Southeast Asia's fastest-growing sectors. Hyperscalers, colocation providers, and sovereign cloud operators are pouring investment into Johor, Cyberjaya, and Seremban corridors. Every one of these facilities needs insurance from the day ground is broken until the last server is decommissioned.

Data centres face a unique combination of construction risk and operational risk that demands specialist P&E (Property & Engineering) insurance. The construction phase involves heavy M&E work, power infrastructure, and cooling systems. The operations phase involves electronic equipment worth hundreds of millions, uptime SLAs measured in 99.999%, and business interruption costs that run into millions per day.

This guide covers:

• The complete DC insurance programme: construction phase vs operations phase
• P&E product mapping for data centre risks
• Key coverage considerations for hyperscale, colocation, and enterprise DCs
• Premium factors and what drives DC insurance costs
• Tenant vs landlord insurance obligations
• Claim scenarios specific to Malaysian data centres
• How Foundation structures DC insurance programmes

Malaysia's Data Centre Landscape

Understanding the market context helps explain why DC insurance is a specialist discipline.

Factor	Detail
Key corridors	Johor (closest to Singapore, competitive power costs), Cyberjaya (established hub, fibre connectivity), Seremban (emerging corridor)
Major investors	Microsoft, Google, AWS, Equinix, Bridge Data Centres, YTL, TM, NTT, Princeton Digital Group
Typical facility size	10MW - 100MW+ per campus. Hyperscale campuses exceeding 200MW planned.
Construction value	RM200M - RM2B+ per campus depending on capacity and tier level
Key P&E risk drivers	Electrical infrastructure (80%+ of asset value), cooling systems, fire suppression, power redundancy
Revenue model	Revenue starts immediately upon commissioning. Any delay = direct revenue loss. SLA penalties for downtime.

The combination of high construction value, concentrated electronic assets, and extreme revenue sensitivity makes data centres one of the most complex P&E insurance placements in the Malaysian market.

The Two-Phase DC Insurance Programme

Data centre insurance splits into two distinct phases with different risk profiles and policy structures.

Phase	Construction	Operations
Duration	18 - 36 months (build + commissioning)	Ongoing (annual renewal)
Primary risk	Physical damage to works, design defects, delay	Equipment failure, power interruption, cooling failure
Core P&E policies	CAR + EAR, DSU, SPPI, WC, CGL	EEI, IAR/Fire, MB/MLOP, BI, BPV
Sum insured basis	Total contract value (civil + M&E + IT infrastructure)	Replacement value of all installed assets + annual gross profit
Who arranges	Developer or main contractor (per contract terms)	DC operator or building owner

Construction Phase: P&E Coverage Map

DC construction is heavily M&E-intensive. The civil structure may represent only 20-30% of the total contract value. The remaining 70-80% is electrical infrastructure (transformers, switchgear, UPS, generators), cooling systems (chillers, CRAH units, piping), and IT infrastructure (cable trays, containment, network backbone).

Construction Phase Policy Stack

Policy	What It Covers for DC Construction	DC-Specific Considerations
CAR	Civil works, structural steel, building envelope, site works	Civil portion is relatively standard. Ensure raised floor, containment rooms, and fire suppression infrastructure are included.
EAR	M&E installation: transformers, switchgear, UPS, generators, chillers, CRAH, BMS	This is the dominant policy for DC construction. M&E represents 70-80% of project value. Testing and commissioning phase is highest risk.
DSU (Delay in Start-Up)	Lost revenue from construction delays caused by insured damage	Critical for DCs. Revenue starts immediately upon commissioning. A 3-month delay on a 10MW facility can mean RM10M+ in lost revenue.
SPPI	Design liability for architects, M&E engineers, consultants	DC design is specialist. Cooling design errors, power distribution miscalculations, and redundancy design failures can be catastrophic. Run-off cover essential.
CGL	Third-party injury/damage from construction activities	Standard requirement. Higher limits for sites adjacent to operational facilities.
WC	Worker injury protection for construction workforce	High proportion of M&E workers (electrical, HVAC, fire protection). Electrical work carries elevated risk.

The key DC construction insurance insight: DSU is not optional. Unlike a warehouse or factory where a few months' delay is inconvenient, a DC delay directly impacts revenue commitments, tenant SLAs, and potentially penalties under pre-lease agreements. DSU should be structured to reflect the actual anticipated revenue from day one of operations.

Operations Phase: P&E Coverage Map

Once operational, a data centre's risk profile shifts from construction damage to equipment failure and business interruption. The asset mix is predominantly electronic and electrical equipment, with mechanical systems (cooling) as the critical support infrastructure.

Operations Phase Policy Stack

Policy	What It Covers for DC Operations	DC-Specific Considerations
EEI	Servers, networking, UPS (electronic parts), PDUs, BMS, security systems	The primary DC operations policy. Covers internal electronic faults, surges, static damage. For colocation, tenant equipment may be insured separately.
IAR / Fire	Building structure, non-electronic contents, external damage perils	Covers the shell, raised floor, containment, cable trays. IAR preferred over Fire for broader accidental damage cover. Water damage from cooling leaks is a key peril.
MB/MLOP	Generators (mechanical parts), chillers, CRAH compressors, cooling towers	Covers mechanical failure of cooling and power generation equipment. Chiller compressor seizure is one of the most common DC claims.
BI (Business Interruption)	Lost revenue from property damage causing downtime	Must be structured carefully. BI triggers from IAR/Fire events. MLOP triggers from MB events. ILOP triggers from EEI events. All three loss-of-profits covers may be needed.
BPV	Pressure vessels in cooling systems (if applicable)	Some DC cooling systems use pressure vessels. Check if DOSH CF registration is required.
CGL	Third-party liability from DC operations	Covers injury to visitors, contractors, and damage to tenant property from building systems failure. Higher limits for multi-tenant colocation.

DC Asset Value Distribution

Understanding where the value sits in a data centre determines which policies carry the heaviest coverage.

Asset Category	Typical % of Total Value	Primary Insurance Policy
IT equipment (servers, storage, networking)	30-50%	EEI (tenant or operator)
Electrical infrastructure (transformers, switchgear, UPS, PDUs)	20-30%	EEI (electronic parts) + MB (mechanical parts)
Cooling systems (chillers, CRAH, piping)	10-20%	MB (compressors, fans) + IAR (piping, structure)
Generators	5-10%	MB (engine/alternator) + EEI (control systems)
Building shell and civil works	10-15%	IAR / Fire
Fire suppression and security	3-5%	IAR

In most data centres, 60-80% of the total asset value is electronic or electrical equipment. This makes EEI the single most important policy for DC operations, not IAR or Fire.

Get a DC insurance programme structured for your facility

Tenant vs Landlord Insurance Obligations

In colocation data centres, insurance responsibilities split between the building owner (landlord) and the tenants. Getting this wrong creates coverage gaps or duplicate coverage.

Asset / Risk	Landlord (DC Operator) Insures	Tenant Insures
Building structure	Yes (IAR/Fire)	No
Shared infrastructure (power, cooling, fire suppression)	Yes (EEI + MB + IAR)	No
Generators and UPS	Yes (MB + EEI)	No
Tenant's IT equipment (servers, storage, networking)	No	Yes (EEI or IT equipment policy)
Business interruption (landlord's revenue)	Yes (BI/MLOP/ILOP)	No
Business interruption (tenant's revenue)	No	Yes (tenant's own BI)
Third-party liability (building operations)	Yes (CGL)	Tenant's CGL for own activities

The lease agreement should clearly specify which party insures what. Ambiguity creates disputes after a loss event. Foundation reviews DC lease agreements as part of our insurance programme structuring to ensure no gaps exist between landlord and tenant coverage.

Key DC Insurance Considerations

Business Interruption Complexity

Data centre BI is more complex than standard factory BI because multiple loss-of-profits policies may apply to a single facility.

Trigger Event	Loss-of-Profits Policy	DC Example
Fire or property damage	BI (attached to IAR/Fire)	Fire in electrical room causes 2-week shutdown
Machinery breakdown	MLOP (attached to MB)	Chiller compressor seizure, cooling capacity reduced for 6 weeks
Electronic equipment failure	ILOP (attached to EEI)	UPS system failure causes server damage and SLA breach
Boiler/PV failure	BOLOP (attached to BPV)	Chilled water pressure vessel rupture (if applicable)
Construction delay	DSU (attached to CAR/EAR)	Flood during construction delays commissioning by 4 months

A DC operator may need all four operational loss-of-profits covers (BI, MLOP, ILOP, BOLOP) to be fully protected. Missing any one creates a gap where downtime from a specific cause category isn't compensated.

The Cooling Failure Scenario

Cooling failure is the most feared operational risk in any data centre. Servers generate enormous heat, and without cooling, server room temperatures can reach critical levels within minutes. This is why cooling redundancy (N+1, 2N) and insurance coverage for cooling systems are non-negotiable.

Cooling Failure Cause	Insurance Coverage	Consequence
Chiller compressor mechanical failure	MB (compressor) + MLOP (lost revenue)	Reduced cooling capacity, potential load shedding
CRAH unit electronic control failure	EEI (controls) + ILOP (lost revenue)	Localised hotspot, server throttling or shutdown
Chilled water pipe burst	IAR (pipe and water damage) + BI	Water damage to servers below, cooling loss
Cooling tower fan motor burnout	MB (motor) + MLOP	Heat rejection capacity reduced
BMS malfunction causing cooling shutdown	EEI (BMS) + ILOP	Uncontrolled temperature rise across facility

DC Claim Scenarios

Scenario 1: UPS System Failure in Colocation DC

A Tier III colocation facility in Cyberjaya experiences a UPS system failure during a utility power fluctuation. The UPS fails to transfer to battery, causing a momentary power interruption to two server halls. Multiple client servers suffer hard shutdowns. Data corruption and hardware damage result.

Claim Component	Policy	Amount
UPS module replacement	EEI	RM450,000
Damaged server hardware (operator's equipment)	EEI	RM280,000
SLA penalty payments to tenants	ILOP	RM600,000
CGL claim from tenant for damaged equipment	CGL	RM350,000
Total		RM1,680,000

Scenario 2: Construction Delay on Hyperscale Build

A hyperscale DC campus in Johor suffers flood damage during construction. The incoming 132kV transformer (18-month OEM lead time) is damaged beyond repair. The entire campus commissioning is delayed by 8 months while a replacement transformer is manufactured and installed.

Claim Component	Policy	Amount
Transformer replacement (supply + installation)	EAR	RM8,000,000
Flood damage to site works and installed M&E	CAR + EAR	RM3,500,000
DSU: 8 months delayed revenue (50MW campus)	DSU	RM40,000,000+
Total		RM51,500,000+

The DSU claim dwarfs the physical damage claim by 3x. This is why DC developers must not treat DSU as an optional extra. The revenue loss from construction delay is the single largest financial exposure in a DC development project.

Scenario 3: Chiller Failure Causing Server Hall Shutdown

An enterprise DC in KL loses two out of three chillers simultaneously due to a power surge damaging the chiller control boards. The remaining chiller cannot maintain safe temperatures. Operations team must shut down 60% of server load to prevent thermal damage.

Claim Component	Policy	Amount
Chiller control board replacement (2 units)	EEI	RM180,000
Temporary portable cooling rental (4 weeks)	ILOP (increased working costs)	RM95,000
SLA penalties for reduced capacity period	ILOP	RM320,000

DC Insurance Premium Drivers

Factor	Impact	What Underwriters Want to See
Tier classification	Higher tier (III, IV) = more redundancy = lower risk = better rates	Uptime Institute certification or design-equivalent documentation
Redundancy architecture	N+1, 2N, or 2(N+1) for power and cooling. Higher redundancy = lower premium.	Single-line diagrams, redundancy matrix
Fire suppression system	Gas-based (FM200, Novec 1230) preferred over sprinklers for server halls.	VESDA detection, suppression type, test records
Location / flood exposure	Flood-prone locations attract higher rates or flood deductibles.	Flood study, elevation data, drainage design
Maintenance regime	Comprehensive maintenance = lower failure rates = better pricing.	PM schedules, OEM service contracts, CMMS records
Claims history	Prior claims significantly affect renewal pricing.	5-year loss record with root cause analysis
Total insured value	Larger facilities with higher TIV may get volume discounts but carry accumulation risk.	Asset register, replacement values, revenue projections

Who Needs DC Insurance

Stakeholder	Insurance Needs
DC developer (building the facility)	CAR + EAR + DSU + SPPI + CGL + WC during construction. Transition to operational programme at handover.
DC operator (running the facility)	Full operational stack: EEI + IAR + MB/MLOP + BI + BPV + CGL. Primary insurance buyer for ongoing operations.
Colocation tenant	EEI for own IT equipment + tenant's BI + CGL. Verify landlord's coverage doesn't create gaps.
M&E contractor (building services)	EAR (if responsible) + CGL + WC + SPPI (if design-build). CGL limits typically RM5M-20M for DC sites.
DC consultants (design engineers)	SPPI with adequate limits and 6-year run-off. DC design errors have long-tail liability.
Lenders / investors	Require comprehensive insurance as condition of financing. Often specify minimum coverage and limits.

Talk to Foundation about your data centre insurance programme

FAQ

What's the most important insurance for an operational data centre?

EEI (Electronic Equipment Insurance) is the primary policy for DC operations. In most data centres, 60-80% of asset value is electronic or electrical equipment. EEI covers internal faults, surges, and accidental damage to this equipment. But EEI alone isn't enough. You also need MB for mechanical systems (chillers, generators) and IAR for the building and non-electronic contents.

Is DSU insurance necessary for DC construction?

Yes, it's the most financially significant coverage in a DC construction programme. DC revenue starts immediately upon commissioning. If construction damage delays commissioning by months, the lost revenue can dwarf the physical repair cost. In our Scenario 2, the DSU claim (RM40M) was 3x the physical damage claim (RM11.5M).

How does DC insurance differ from standard factory insurance?

Three key differences. First, EEI replaces IAR as the primary property policy because electronic assets dominate the value. Second, business interruption structures are more complex because you may need BI, MLOP, and ILOP to cover different failure modes. Third, SLA penalty exposure means BI calculations must include contractual penalties, not just lost revenue.

What should colocation tenants insure?

Tenants should insure their own IT equipment under an EEI policy, their business interruption exposure, and their third-party liability. The landlord insures the building, shared infrastructure, and their own BI. Review the lease agreement to identify exactly where the responsibility boundary lies. Gaps between landlord and tenant coverage are common and can be costly.

Does fire insurance cover a data centre?

Fire insurance covers fire, lightning, and explosion damage to the building. But fire policies don't cover equipment breakdown, electronic faults, water damage (from cooling leaks), or most of the perils that actually threaten data centres. IAR is better than Fire for the building layer, and EEI is essential for the equipment layer. Fire alone is inadequate for any data centre.

How are DC insurance premiums calculated?

DC premiums are driven by total insured value, tier classification/redundancy level, fire suppression systems, location (flood exposure), maintenance quality, and claims history. A well-designed Tier III facility with comprehensive maintenance will get significantly better rates than a Tier II facility with minimal redundancy. Your broker's ability to present the risk effectively also matters: DC underwriting is specialist territory.

What happens during the construction-to-operations insurance transition?

This is a critical handover point. Construction policies (CAR, EAR, DSU) expire at project completion. Operational policies (EEI, IAR, MB, BI) must be in place before the construction policies lapse. There should be zero gap. Foundation coordinates this transition to ensure continuous coverage from construction through commissioning to operations.

Do I need separate policies for each server hall?

Typically no. Most DC operators insure the entire facility under a single programme with blanket sums insured. Individual server halls may have different limits or sublimits depending on their equipment value. For multi-campus operations, you can structure a single programme covering all campuses, which is usually more cost-effective than individual site policies.

What about cyber insurance for data centres?

Cyber insurance is separate from P&E insurance. P&E policies cover physical damage to equipment and resulting business interruption. Cyber insurance covers data breaches, network security failures, and digital liability. Both are needed, but they serve different purposes. Foundation specialises in the P&E layer. For cyber coverage, we can coordinate with specialist cyber insurance providers.

How does Malaysia's flood risk affect DC insurance?

Malaysia's tropical climate means flood is a real exposure, especially in low-lying areas. The December 2021 Klang Valley floods demonstrated how severe flooding can be. DC operators in flood-prone areas face higher premiums, higher flood deductibles, or flood sublimits. Elevated construction, flood barriers, and robust drainage design significantly improve insurability. Foundation helps DC operators present flood mitigation measures to underwriters to secure better terms.

Foundation Conclusion

Data centres are among the most complex P&E insurance placements in the Malaysian market. The construction phase requires specialist EAR coverage for heavy M&E installation, DSU for revenue protection, and SPPI for design liability. The operations phase requires EEI as the primary equipment policy, MB for mechanical systems, and a carefully structured BI programme that covers all failure modes.

Getting DC insurance right means understanding both the physical risk and the revenue risk. The physical damage from most DC incidents is manageable. The business interruption and SLA penalties are where the real financial exposure lies.

Talk to Foundation's P&E specialists about your data centre programme

Disclaimer: This article provides general guidance on insurance coverage available in the Malaysian market. Policy terms, conditions, and availability vary by insurer. Always review your specific policy wording or consult a qualified insurance professional before making coverage decisions.