Zurich Insurance Group said the level of investment in global data centers may soon make it necessary for participating insurance companies to start selling securitized products to spread risks among a wider investor base.
“I do expect that as the number of projects being built at these values continues to increase, these types of discussions will become increasingly necessary,” although the market “doesn’t exist today,” Kelly Kinzer, global head of construction and surety at Zurich, told Bloomberg.
Lenders in both private and public markets have been lining up to invest in the global infrastructure of cloud and artificial intelligence services as they bet on consumer and industry demand. Tech giants such as Oracle, Meta and Alphabet will help drive global bond issuance to more than $6.57 trillion in 2025.
Five years ago, the average value of data center projects in Zurich’s portfolio was $150 million, compared with $3 billion now, Kinzer said.
The expansion of private credit into financing infrastructure projects such as data centers has changed the dollar amounts and delivery dynamics of such projects, the insurer said in its Future of Construction report released this week.
“They typically impose higher performance thresholds, shorter decision-making periods and less ability for operational deviations than traditional bank loans,” the report said.
Increases in private credit have also led to the elimination of loss limits, which would limit the total amount of risk an insurer can take.
“We’re seeing more and more people expecting to purchase these projects in full, which puts the industry in a very challenging position,” Kanazawa said. “There simply isn’t enough insurance capacity in the market today.”
Data cited by XDI shows that global artificial intelligence construction will cost US$7 trillion in the next four years, of which the four largest hyperscale companies spent more than US$400 billion on infrastructure last year alone.
These massive investments are ushering in a new era of risk. According to S&P Global, the total insured value per location of a single data center is estimated to be as high as $30 billion, while some of the world’s largest bridges have a total insured value of $10 billion.
Against this backdrop, investors are looking to take advantage of possible insurance gaps. Insurance-related securities are instruments whose returns are tied to the occurrence of specific events. The most common type is catastrophe bonds, and investors in these bonds receive a premium unless specific weather or other events actually occur.
Compared with other property and casualty insurance, data center insurable risks include damage from weather, but due to the soaring cost of GPU computing chips, the required coverage is often higher than for other assets. Opportunities to provide risk coverage around data centers have emerged as insurance companies seek new revenue streams to help offset slowing premium growth in property and casualty insurance.
Cumulative global data center-related insurance premiums are expected to reach $134 billion between 2026 and 2030, Artemis said, citing a report from brokerage Aon Plc.
Alternative investors such as Euler ILS Partners are partnering with insurance companies to underwrite specialty policies, Bloomberg reported earlier. Aon said it had also been approached by ILS investors asking how to participate in the market.
Insurance-linked securities help diversify the risks associated with betting on data centers at a time when the ultimate use cases for AI are unclear and expectations for the productivity gains achieved have yet to be proven. While investors in insurance-linked securities purchase the risk associated with asset damage, they do not assume the risk that the data center will not be profitable.
Photo: Data processing in Zurich; Photo credit: Adrian Bretscher/Getty Images
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