Power generators are failing to adequately manage risks as soaring electricity demand driven by AI data centres piles pressure on ageing infrastructure, according to insurer FM.

A report from the commercial property specialist finds 27% of insured losses occurred at just 2% of its client sites that had previously been identified as having the highest risk.

FM says the findings show the value of proactive risk engineering and loss prevention.

The report, drawing on seven decades of client loss data, finds mechanical and electrical breakdowns accounted for more than 70% of all power generation loss events.

Lengthy replacement times for critical pieces of equipment are blowing out business interruption costs.

FM says surging electricity demand driven by the rapid expansion of AI data centres and the broader electrification of economies is exposing the industry’s vulnerabilities.

Data centres place strain on transformers, switchgear and cooling systems because of their concentrated, high-density power requirements.

Between 2021 and last year, FM clients experienced 427 power generation losses with a combined gross value of about $US3.7 billion ($5.28 billion).

“Power generation is a pillar of national and global security,” FM chief engineer Stuart Keller said.

“Losses within this sector reverberate beyond individual facilities, affecting macroeconomic performance, energy availability, the resilience of critical infrastructure and local communities.”

The fact more than one-quarter of the losses come from a small proportion of sites highlights opportunities to improve risk management and operational resilience, the report says.

It calls for client vigilance, including proactive inspection, testing, maintenance, contingency planning and scenario-based training.

“Our experience conclusively demonstrates that proactive loss prevention leads to materially fewer and less severe losses,” Mr Keller said. “Not only do clients strengthen their operational resilience, they protect their long-term reliability and profitability.”