NEW YORK/LONDON: Space companies developing orbital AI data centers are beginning discussions with insurers as they seek to turn a futuristic concept into a viable industry backed by major players including SpaceX and Blue Origin.

The talks mark an early step toward building a market for space-based data infrastructure, which supporters believe could help overcome power and capacity constraints facing Earth-based data centers as demand for artificial intelligence computing continues to surge.

Industry participants say securing insurance will be essential if orbital data centers are to attract the financing needed for large-scale deployment.

Reuters spoke with four brokers and underwriters, along with three space companies, who confirmed that preliminary discussions have taken place about potential insurance coverage for such projects.

Blue Origin and several startups, including Orbital, Starcloud, Lonestar Data Holdings and Cowboy Space, have all signaled plans to develop space-based data centers.

Interest in the concept has grown since Elon Musk described orbital data centers as a potential future for AI development ahead of SpaceX's record-breaking public listing this month.

Insurance broker Marsh said several companies have approached insurers to better understand what future coverage for orbital data centers might involve.

"We're already starting to see companies that are focused on data centers and companies that are focused on digital infrastructure looking to the insurance community for support," said Patton Kline, U.S. aviation and space practice leader at Marsh.

Lonestar said it recently hosted a briefing at Marsh's offices for representatives from Lloyd's of London, with about 25 insurers attending the event.

SpaceX and Blue Origin did not respond to requests for comment.

The insurance industry already provides coverage for launch failures, satellite malfunctions, orbital debris and space weather. According to industry executives and insurance company Axa XL, the global space insurance market generates roughly $500 million in annual premiums.

However, insurers have little historical data to assess the risks associated with orbital AI infrastructure.

"The conversations in the market are focused on whether the risk can be modeled, rather than what the premium should be," said Kasey Roh, U.S. head of Upstage AI, which develops AI tools for insurance companies.

One challenge is determining how to value advanced AI chips operating in space, where equipment could be exposed to harsh environmental conditions and rapidly changing technology cycles, according to Orbital CEO Euwyn Poon.

Industry participants say the market remains in its infancy, with many projects still dependent on venture capital funding.

David Wade, a space underwriter at Atrium, said broader insurance demand would likely emerge only after companies move beyond early-stage financing and begin raising debt to expand operations.

"Until we get past that early round of financing and start seeing some of these companies expand by raising debt, I think the insurance needs are very limited at the moment," Wade said.