FM warns of rising risks to power generation assets

FM has published a report warning that risks to power-generation assets are rising as electricity demand grows, driven in part by data centres and electrification.

The report identifies mechanical and electrical breakdowns as the main causes of loss in the sector. These failures account for more than 70% of all loss events in power generation and more than 80% of the total financial impact each year.

Gas turbines are the single largest source of property damage across the industry. Gas turbines and transformers also feature heavily in business interruption losses, with replacement lead times often stretching into years because of supply chain constraints.

FM based its findings on seven decades of client loss data in power generation. Between 2021 and 2025, clients recorded 427 power-generation losses with gross losses of about USD $3.7 billion. Steam turbines and gas turbines were the most severe and costly sources of loss.

The report places these findings against a backdrop of rising demand from AI-related data centres and broader electrification. It argues that older equipment and gaps in risk management are adding strain to a system that is becoming more complex.

In Australia and New Zealand, FM linked the issue to the shift in the energy mix.

"Australia's energy transition is increasing the complexity of the power system at a time when reliability has never been more important," said Andrew Stafford, Operations Manager for Australia and New Zealand, FM.

Fire remains a notable cause of losses, particularly when sparked by electrical faults, mechanical problems or hot-work activity. FM also pointed to stress on transformers, switchgear and cooling systems at AI data centres because of concentrated high-density loads.

Another recurring problem is reliance on single pieces of critical equipment. When one major asset fails, operators can face prolonged disruption because replacement units are scarce and delivery times are long.

Concentrated risk

More than a quarter of FM client losses, about 27%, originated from the 2% of locations previously identified as most likely to suffer a loss. The finding suggests that a relatively small number of sites account for a disproportionately large share of damage and interruption.

The pattern strengthens the case for tighter inspection and maintenance routines at higher-risk facilities. The report highlights inspection, testing, monitoring, maintenance, housekeeping, contingency planning and scenario-based training as ways to reduce losses.

Stuart Keller, Chief Engineer at FM, said the implications of failure extend beyond plant owners and operators.

"Power generation is a pillar of national and global security," said Stuart Keller, Chief Engineer, FM.

"Losses within this sector reverberate beyond individual facilities, affecting macroeconomic performance, energy availability, the resilience of critical infrastructure and local communities. As demand increases and system complexity grows, maintaining operational efficiency and proactively managing risk are essential," Keller said.

The report reflects growing concern across electricity systems as data-centre demand rises sharply and generators try to keep ageing fleets in service for longer. For insurers and operators alike, the combination of higher utilisation, harder-to-source components and more complex operating conditions is increasing the cost of failure.

FM said its analysis drew on engineering research, site visits, relationships with original equipment manufacturers, real-world loss data and predictive analytics. It framed the report as a guide to where losses occur most often and which assets are most exposed.

Keller said the company's historical data supports a more preventive approach.

"Our experience conclusively demonstrates that proactive loss prevention leads to materially fewer and less severe losses," Keller said.

"Not only do clients strengthen their operational resilience, they protect their long-term reliability and profitability," he said.