Data centre opportunity for ILS capital must be effective in terms of the economics: Swiss Re

When it comes to alternative sources of reinsurance capital and insurance-linked securities (ILS) investors supporting the massive need for capacity to insure and reinsure the data centre build-out, Swiss Re executives explained in Monte Carlo that it must be effective in terms of the economics.

With the reinsurance industry meeting in Monte Carlo at the 2026 Rendez-vous event, Swiss Re held a briefing focused on its recent research into the data centre risk transfer opportunity.

As we reported, Swiss Re Institute’s report highlights a potential US$200 billion premium opportunity by 2030 from data centres and related renewable energy infrastructure, within which it sees alternative reinsurance capital, including catastrophe bonds and sidecars, as likely to play a key role.

During the briefing held on Saturday at the Monte Carlo RVS event, Jérôme Haegeli, Group Chief Economist of Swiss Re and Head of Swiss Re Institute, stated that, “the physical economy is back,” but with this build-out set to create larger, higher-value assets than the industry has dealt with before.

However, while the size of the opportunity is significant for the insurance and reinsurance industry, it also comes with challenging exposures, as “risk accumulation is being rewired,” Haegeli explained.

He went on to say that the data centre risk transfer and insurance opportunity requires a different risk architecture and this could mean the industry needs to devise new and thoughtful ways to match capital sources with these meaningful exposures.

So, insurability is key when it comes to digital infrastructure and this significant capex spend, as concentrated and high-value exposures and complex ongoing operations require a new mindset.

The size of the opportunity is estimated to mean as much as $200 billion of cumulative insurance premiums are going to be needed to support the data centre build-out and related renewable energy infrastructure between now and 2030, according to Swiss Re.

The capex spend on artificial intelligence data centre’s is estimated to reach as much as $1.6 trillion a year by 2031, or around $7.6 trillion cumulatively between 2026 and 2031.

That kind of spend on high-value and high-tech data centre campuses means a significant amount of risk will need to be transferred, from these asset intensive projects.

Haegeli said that much of the risk will need to be reinsured, with insurers quickly hitting their risk limits and he called for the industry to work to develop an approach that can deliver the syndicated and layered capacity that will be required.

It’s not just the build of data centres and related infrastructure, including energy, that requires capacity, it is the ongoing “operational phase where the role of insurance rises,” Haegeli explained.

Gianfranco Lot, Chief Underwriting Officer, Property and Casualty at Swiss Re, also spoke at the briefing in Monte Carlo on Saturday and said that capacity is lacking across the industry to meet the insurance and reinsurance needs of the data centre build-out.

Lot explained, “The insurance industry is not able to cope with the demand for insurance, so the financiers of these data centres would like to insure more. There’s just not enough insurance capacity out there, and that’s where reinsurance comes into play. Because most of the insurance capacity that is being provided is reinsured because these are key risks.

“So it’s a significant opportunity for the insurance industry, but even more so for the reinsurance industry, and we believe that capital markets can play a significant role there.”

Lot also said that, “This is our business to make sure we manage concentration risk appropriately, but it’s also something that we need to do well in order to enable these data centres to be built and these data centres to be insured.”

Closing this presentation section of the Swiss Re briefing, Lot added, “Let me leave you with this. This is very significant. It’s a very significant development. It’s very significant for the insurance industry, and most importantly for the reinsurance industry. About 80 to 85% of these large peak risks are reinsured. There’s no insurance possible without reinsurance of these risks.”

The briefing moved into a Q&A discussion and this is where the topic of alternative reinsurance capital and insurance-linked securities was raised more.

Lot responded to a question to explain, “On the insurability and reinsurability, the fact that already 80 to 85% of these hyperscalers, or these bigger infrastructure projects as such, are reinsured means it’s a concentration that already exists in reinsurers’ portfolios. And the question is how to diversify and make sure you continue to insure and reinsure these infrastructure projects without having a peak exposure that you’re being surprised about?

“That’s our job. Our job is also to make sure that we build balance-sheets for these types of projects, right through alternative capital, through different vessels that allow us to to transfer the risk with parties that are interested in making a return. And finally, there’s already risk transfer mechanisms emanating that allow the sharing of risk.”

Haegeli said that the sheer scale of these projects means more capacity is required, which means alternative capital and structures from catastrophe bonds to sidecars could be supportive of this need.

Lot then went into more details later in the discussion, explaining that, “We haven’t seen a lot of sidecars emanate yet, or specific infrastructure cat bonds, which I think could be a very interesting tool for investors to invest in.

“Because it’s insurance, right? It’s insurance returns as opposed to the investment returns. But we’ll have to see, is the true answer for how the capacity will evolve. What is clear is that, the demand and the potential for both premium and exposure is so big that our clients are establishing separate vehicles, separate treaties for these data centres, which tells you they want to carve it out and make sure that it’s appropriately fed with capacity from the reinsurers.

“So we see this trend continuing, which is a welcome trend because it provides transparency around where these data centres are and how much accumulation generates on each particular balance-sheet.”

Asked what Swiss Re is currently doing to identify where the opportunity could actually be for ILS investors to get involved, Lot said the company is actively thinking about this.

He explained, “We’re evaluating various possibilities. We have partners that already are engaging with Swiss Re on portfolios of risks, think about nat cat risks, those would also fall into those sidecars.

“There is clearly a magnitude here that needs further reflection. I think it’s an opportunity for alternative capital, but it needs to be effective as well, in terms of the economics.”

The economics need to work for all parties in the risk transfer chain, from originators such as brokers, through the insurance layer, to reinsurance and ultimately alternative or ILS capacity from the capital markets.

With such large sums involved, this seems like an opportunity to perhaps reimagine how large risks are underwritten, aggregated into portfolios and pools. Then those portfolios be sliced and segmented or segregated, to create economically viable risk opportunities that meet the requirements all forms of capital are looking to allocate to or invest in.

Read other Artemis articles about the data centre risk transfer opportunity for ILS here.