Colocation Mining Insurance: Who Covers What When You Don’t Own the Facility

Colocation mining — owning ASICs housed inside a third-party facility — makes economic sense: access to utility-scale power contracts and professional management without the capital cost of building your own site. Texas hosts some of the largest colocation operations in the country, with Riot Platforms (Whinstone) and Core Scientific running utility-scale facilities on the ERCOT grid. The economics work. The insurance, for most operators, doesn’t.

When a fire at your host’s facility destroys your ASICs, the natural assumption is that the host’s insurance covers your equipment. In most colocation arrangements, that assumption is wrong. The coverage gap can leave you with hundreds of thousands in uninsured losses on equipment you owned but stored in someone else’s building.

Three Risk Pools — and Where Coverage Breaks Down

Risk Pool 1: The Physical Facility (Host’s Responsibility)

The host owns the building, electrical infrastructure, and cooling systems. Their commercial property policy covers these assets — when a fire damages the building or destroys the host’s PDUs, the host’s insurer pays. The problem: facility damage that forces an outage creates BI losses for you even when the host’s property is fully covered and being repaired. The host’s BI protects the host’s revenue. Your lost mining revenue is a separate loss category their policy doesn’t touch.

Colocation arrangements change the insurance equation significantly — but the underlying cost structure for a properly insured mining operation stays relatively consistent regardless of ownership model. Our guide on bitcoin mining insurance costs in 2026 breaks down what operators pay across both owned and collocated facility structures.

Risk Pool 2: Your ASICs in Someone Else’s Building

This is where most colocation insurance failures happen. Your ASICs are your property — on your balance sheet, potentially financed — but physically located inside someone else’s building. When that building has a fire, your equipment is destroyed alongside the host’s.

The host’s “property of others” provision typically sublimits coverage to $10,000–$100,000. Against a $2M ASIC inventory, that’s effectively nothing. The clean solution is your own property policy covering your ASICs wherever they’re located. Specialty markets — Evertas, AnchorWatch, Relm — write hosted miner coverage regularly; generalist commercial carriers often won’t. Inland marine is sometimes a better structural fit than scheduled commercial property for hosted miners, because inland marine follows property regardless of location — exactly the colocation scenario.

What your hosting agreement should require from the host: adequate facility property coverage proof, additional insured status on their GL policy, clear indemnification for losses caused by host negligence, and 30-day cancellation notification if coverage lapses. From yourself: your own property coverage on your ASICs at the host’s location, your own BI for hash rate losses during host-side outages, and a waiver of subrogation so your insurer can’t sue the host after paying your claim and damage the hosting relationship.

Risk Pool 3: Business Interruption From Host-Side Events

Your ASICs are undamaged, but your host’s facility is offline — power outage, infrastructure fire, ERCOT curtailment order. Your hash rate is zero, your revenue is zero, but your loans are still accruing. Standard property-based BI requires physical damage to your own property to trigger. No damage to your ASICs means no BI coverage, regardless of why you’re offline.

Covering this gap requires specific endorsements. Contingent business interruption (CBI) extends BI coverage to losses caused by physical damage at a dependent property — your host’s facility — even when your own equipment isn’t damaged. Civil authority coverage applies when access is prevented by government action, including ERCOT emergency curtailment orders under SB 6. Service interruption coverage addresses utility failures without requiring physical damage. For Texas hosted miners, all three provisions together cover most of the BI scenarios you’ll actually face.

Hosting Agreement Clauses That Drive Your Insurance Needs

The hosting agreement determines your rights after a loss. Three indemnification patterns are common. Gross negligence only: the host is liable only for intentional misconduct — an ordinary negligence fire leaves you with no contractual recovery, making your own property coverage your only protection. This is the most common language in institutional agreements. Negligence standard: the host is liable for ordinary negligence, but you still have to prove it through litigation — your property insurer pays first and subrogates. Risk of loss allocation: some agreements explicitly place all risk on the hosted miner regardless of cause. Know which you have before a loss, not after.

Require your host to provide annual certificates of insurance confirming facility property and GL limits, with 30-day cancellation notice. A certificate doesn’t make you an insured — request additional insured status on the GL policy explicitly. Request mutual waivers of subrogation from both insurers. For operations above $500K in equipment value, legal review of the hosting agreement before signing is worth the cost.

Texas-Specific Colocation Scenarios

ERCOT creates colocation insurance situations that don’t exist in other states. Under SB 6, facilities at or above 75 MW must comply with mandatory curtailment orders. When your host curtails in response to an ERCOT directive, this is a civil authority event — not physical damage. Standard property BI doesn’t trigger. Civil authority or specific curtailment provisions are required. This will happen repeatedly at Texas hosting facilities — it’s not a remote risk.

Host financial failure is a real exposure after the Rhodium Enterprises bankruptcy (August 2024) and NFN8 Group Chapter 11 (February 2026). When a host files Chapter 11, the automatic stay may prevent you from retrieving your equipment until bankruptcy court authorizes it — even though you clearly own it. Weeks to months of inaccessibility while your loans accrue. Key protections: complete off-site ASIC serial number inventory, explicit bailment language in the hosting agreement establishing your equipment as bailed property not subject to the host’s security interests, and inland marine with contingent BI for the inaccessibility period.