El Niño is a foreseeable, high-impact risk that most boardrooms still treat as background noise. David Jacob, CEO of Marsh Asia, explains how climate risk moves from construction through operations and insurance, tracing the risks through Asia’s growing data center sector.
A dried-up riverbed. A construction site standing empty in the heat. A cargo ship waiting for water levels that aren’t rising. These are not hypothetical scenarios. Marsh’s 2026 Climate Adaptation Survey shows flooding remains the most widely reported peril, cited by 62% of organizations, but heat stress has risen to second place (36%) ahead of water stress (34%) and tropical storms (25%).
In response, more than half (54%) of organizations have already improved business continuity planning while 40% of organizations are investing in asset engineering such as flood defenses. Yet only 26% say their adaptation measures have been recognized in insurance negotiations, and 62% expect insurance availability or cost to worsen over the next five years.
These risks are currently playing out through El Niño which is sweeping across Asia, testing business continuity plans and physical resilience, and widening the gap in what insurance actually covers.
David Jacob, CEO of Marsh Asia, says climate risk is already showing up on balance sheets, in delayed projects, in capital deployment, strained supply chains, and operations fighting for water and power.
Asia is home to more than 1,400 data centers, and installed capacity outside China is projected to exceed 28GW by 2030. With the US and China set to account for around 62% of new global capacity additions through 2030, the region’s rapid expansion puts El Niño risk directly in its path. An estimated 89% of Asia-Pacific data center capacity is exposed to chronic heat and drought stress, increasing the need for more innovative property damage and business interruption coverage, says Jacob.
Racing against the heatwave
During the construction of a data center, extreme heat reduces safe working hours on construction sites and slows labor productivity, which can fall by up to 57% for every 1°C rise above 28°C. Regulators are already responding with Hong Kong’s Labour Department and Singapore’s Ministry of Manpower tightening rules on outdoor work in extreme heat.
“A construction schedule is a financial commitment,” Jacob says. “Delays affect revenue timing, financing costs, and the owner’s obligations to a tenant or offtaker. Even if a contractor gets an extension of time, the owner can still carry the commercial exposure.”
It gets more complicated once you look at the contract. Force majeure can excuse a contractor from delay penalties, but it doesn’t decide who bears the underlying loss. With a single data center project involving hundreds of contractors, each with their own contractual terms, that complexity compounds quickly.
“That’s exactly why owners need to know how those clauses affect delivery obligations and insurance before they sign, not after a delay has already happened,” Jacob says. “Our digital infrastructure advisory group brings together contract, risk, and insurance expertise to look at those issues as part of the same project. It helps owners understand where their exposure sits and make better-informed decisions before construction even begins.”
Planning for unplanned supply-chain disruption
Recently, the Panama Canal cut its daily transit slots as water levels dropped, and the impact rippled far beyond the canal itself. For an industry waiting on servers, chillers and switchgear, a delay anywhere in that chain pushes back the whole project, and the revenue with it.
“You need climate projections built into the project schedule from day one, so you can anticipate the potential delay and cost before it happens,” Jacob says.
“And that supply chain visibility can’t stop at your own site,” he says. “You need AI-powered technology that provides multi-tier supply chain visibility to know your supplier concentrations, logistics dependencies, and where natural catastrophe exposure sits across your whole network. That’s what lets you spot a disruption at a supplier’s site early and gives you time to line up alternatives before it hits.”
Running on borrowed water and power
Once a digital infrastructure facility is up and running, the risk moves from delivery to continuity.
Data centers consumed an estimated 222 billion liters of water globally in 2025 for cooling, underscoring the scale of that competition.
“Power is under the same pressure,” Jacob says. “In markets that depend on hydropower, drought reduces generation directly. We saw that in southwest China in 2022 when a regional drought cut hydropower output, and some factories had to halt or scale back production lines entirely.”
Higher temperatures push up electricity demand just as drought constrains water supply, and this drives up costs and puts real strain on grid infrastructure that’s already aging.
Making every degree count for insurance outcomes
The commercial problem runs from construction straight through operations as these losses aren’t always predictable, measurable, or covered.
“Digital infrastructure runs on a 101% uptime commitment, so there’s almost no tolerance for disruption,” Jacob says. “But heat and drought-driven losses, whether it’s a delayed project or an operational outage, usually fall outside standard business interruption and delay-in-startup coverage as most of those policies still require physical damage before they’ll pay out.”
Jacob recommends that businesses turn to parametric cover as it pays out against a measurable threshold such as rainfall level or a temperature reading rather than physical damage.
“Even where there is no physical damage, the parametric policy can still pay out, giving businesses the liquidity to recover and resume operations,” he says.
The storm after the heatwave
El Niño doesn’t run in isolation. When patterns shift to La Niña, parts of Asia can swing to the opposite extreme where heavy rainfall and flooding can put new pressure on drainage systems, substation design, and site selection.
“La Niña brings a different set of risks, and if you’ve only planned for heat and drought, you’re only half prepared,” Jacob warns.
Thailand’s 2011 floods, which La Niña contributed to, submerged hard-drive factories and disrupted technology supply chains worldwide, a reminder that the second half of the cycle can carry as much risk as the first.
Building resilience in before the first pour
Long-term resilience starts well before ground breaks, and it doesn’t stop once a facility is running.
“Climate risk needs to be a proactive discipline, not a reactive one. The most effective time to manage these risks is during planning and site selection, when design decisions can still be changed cost-effectively,” Jacob says.
“The earlier you model heat and water exposure against a design, the more options you have. Resilience is more cost-effective to design in than to retrofit, and risk engineers can test those decisions against a site’s climate exposure before construction even begins.”
Jacob also points out that companies can’t manage this risk well without the right data or the ability to translate data into smart risk decisions.
“As climate extremes intensify, digital infrastructure businesses need stronger scenario planning and stress-testing of business continuity plans. This includes modeling rainfall and temperature projections against a project’s timeline and thresholds, backed by advisers who understand the sector and can turn that data into decisions,” he says.
The total data center asset base in the Asia and Pacific is projected to reach nearly US$1 trillion by 2030. Climate resilience, Jacob says, starts with understanding your hazards and vulnerabilities across both assets and supply chains, then translating that insight into a measurable adaptation plan. Those improvements need to be documented in a way insurers and capital providers can recognize. And because the risks extend beyond any one company, that also requires partnership with governments, infrastructure providers, and industry peers.
“By connecting climate intelligence to insurance strategy, capital decisions, operations and business continuity, businesses now have the opportunity to bridge the gap between knowing the risk and acting on it before El Niño closes that window,” he says.
The next step for leaders is to turn climate insights into funded, measurable adaptation strategies and communicate that progress in a way that translates resilience investment into better risk and insurance outcomes.