Digital infrastructure expansion requires push in ILS and ART solutions: Aon

The rapid expansion of digital infrastructure creates exposures traditional insurance markets are struggling to absorb. But alternative risk transfer (ART) solutions provide buyers with tools to reshape data center risk and create insurable structures where traditional capacity falls short, with insurance-linked securities emerging as a primary strategy, according to Aon.

In a recent commentary, Aon observed that large-scale, capital-intensive exposures are redefining the risk landscape. This is particularly evident in sectors with concentrated values and long-dated demand, such as digital infrastructure.

“This growth is creating risks that outpace traditional insurance capacity, contributing to limit shortfall and structural coverage gaps,” Aon explained.

“As a result, risk financing is increasingly influencing whether major projects can proceed. Insurance capacity now affects bankability, loan requirements and deal execution, making capital strategy a defining feature of project success.

“These pressures are not cyclical. Capacity constraints for scaled and emerging risks persist across both hard and soft markets, requiring organizations to rethink program design, capital strategy and long-term resilience. Risk leaders who can adapt early gain a strategic advantage in securing capital, accelerating development and sustaining growth.”

Ciaran Healy, Global Captives Leader for Aon, said: “The complexity of matching capital with risk continues to increase. We are moving into a different risk financing landscape and clients will need partners that can combine judgment, experience, real-time insights and dynamic analytics. The traditional approaches are now less fit for purpose.”

By 2030, global data center investment is expected to reach between $5 trillion and $10 trillion, according to Aon.

The concentration of value and embedded energy systems in these modern campuses create structural constraints for insurers. Conventional indemnity programs often face limitations under the sheer aggregation and complexity of hyperscale developments, while reinsurers face rising accumulation pressure across operators and regions.

To bridge this gap, Aon noted that ART solutions allow buyers to transform data center risk into investable frameworks. While strategies include parametric solutions, captives, and zoned structuring, ILS also remains a standout.

Aon also highlighted that 2025 was a record year for catastrophe bond issuance, which signals a maturing appetite for alternative structures.

“The insurance market is more buyer-friendly than in recent years, but use of ART solutions continues to expand. Advances in modeling, diagnostics and data analytics are opening new pathways for investors to participate in risk, enabling clients to build more flexible, evidence-based risk financing strategies,” Aon added.

“Capital providers are increasingly central to large-scale project execution as insurance capacity tightens. Third-party reinsurance capital reached a new high of $124 billion at the end of Q3 2025, illustrating investors’ growing appetite alongside heightened caution of specific risks that carry a large-loss potential. These include nat cats, nuclear verdicts impacting a tightening U.S. excess casualty market, risk financing, AI and professional liability exposures.”

Aon provides a key message which indicates that digital infrastructure’s rise may depend on blending traditional insurance with modern structuring and alternative capital.

By viewing risk as a strategic enabler rather than a cost center, organisations can secure the capital necessary to sustain growth in an increasingly complex environment.