The data centre build-out for artificial intelligence (AI) and hyperscaler infrastructure requires significant amounts of risk capital and is seen as an area of opportunity for the catastrophe bond, insurance-linked securities (ILS) and capital markets.
Data centre catastrophe bonds are being discussed and designed, while other data centre ILS arrangements are already being utilised.
Brokers and structuring agents are working to design risk transfer arrangements that can leverage the appetite of capital markets and ILS investors to bring large-scale insurance and reinsurance capacity to support the data centre infrastructure industries risk transfer needs.
Data centre cat bonds and ILS are anticipated to be used to cover peak natural catastrophe risk exposures, such as earthquakes and hurricanes.
While ILS capacity is also seen as viable for other exposures including business interruption covers, plus weather risk transfer arrangements are being utilised to cover exposure to other climate perils for data centre and other tech or AI infrastructure.
Read our data centre risk transfer news and analysis below, as well as insights on how cat bonds and ILS can play a role.
A new analysis from Lloyd’s global specialist re/insurer MS Amlin has revealed that 56% of the 670 planned US data centre projects representing nearly $800 billion in investment, are located in states that are highly exposed to either hurricanes, severe convective storms, earthquakes or winterstorms.
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As alternative capital continues to integrate further into the global reinsurance market, in order for this to be truly sustainable the sector must prioritise better modeling, greater transparency and careful sequencing of product development so that capital can be deployed where it strengthens resilience, according to Laurent Rousseau of Guy Carpenter.
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Two of the Lloyd’s syndicates operated by specialist ILS investment manager Nephila Capital are set to provide capacity support to a new property treaty consortium launched by MS Amlin, with data centre risk underwriting said to be a key focus for the new venture.
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Adoption of advanced technology and artificial intelligence are serving to expand addressable markets for the insurance and reinsurance industry, with digital infrastructure one example where data analytics are expected to help Aon access institutional sources of capital for its clients, CEO Greg Case explained today.
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Euler ILS Partners, the specialist Swiss insurance-linked securities (ILS) investment manager, sees a $1 billion fund opportunity based on quota share’s to support insurance risk transfer capacity for the data centre build-out, according to reporting from Bloomberg.
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As the data centre build-out continues to expand as an emerging field across the industry, it appears very likely that insurers, reinsurers and various organisations may turn towards catastrophe bonds to source risk capital for these facilities, according to John Seo of Fermat Capital Management LLC.
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During the SIFMA ILS conference in Miami yesterday a panel discussed the topic of data centre risk and some of the considerations that need to be kept in mind as the insurance-linked securities (ILS) market looks at these potentially meaningful opportunities.
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As the global data centre build-out continues to gain traction across the re/insurance market, insurers are reportedly considering the insurance-linked securities (ILS) market to help support their capacity needs, a shift which follows a record opening quarter of catastrophe bond issuance for reinsurance broker Guy Carpenter, CEO Dean Klisura said today.
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As per a new report from Ernst & Young Ltd. (EY), the reinsurance sector is entering a era of “latent market demand” where private equity and alternative capital providers are set to expand their presence by exploring AI-linked securities, cyber catastrophe bonds, and other innovative investment vehicles.
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As the insurance-linked securities (ILS) market continues to expand, Augment Risk is positioning parametric triggers not merely as a peripheral alternative, but as a central, diversifying asset class defined by its structural independence from traditional indemnity-based retrocession, a shift the firm believes is fundamental to unlocking the next phase of third-party capital allocation.
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