In a recent Digital Infrastructure News webinar hosted by global insurance broker and risk advisor Marsh, speakers discussed how the scale, concentration and complexity of modern data center projects are reshaping risk for insurers and reinsurers, while also creating significant opportunities for capital deployment.
The discussion features Jeremy Goodman, chief client and growth officer for Marsh Reinsurance Guy Carpenter, who outlines how the industry is adapting to a surge in large-scale digital infrastructure projects and growing demand for new insurance structures.
Goodman looked back at the evolution of the insurance industry over four decades, highlighting how the role of data centers in the risk landscape has changed.
“The reinsurance market has been underwriting data centers for decades,” Goodman said. “What has changed? Not the asset class, but the size and concentration.”
Goodman said current development plans illustrate how quickly the industry is expanding. “We are currently tracking more than 1,500 data center projects around the world, with more than 900 still in planning and more than 50 projects with capital exceeding $750 million,” he said, noting that many of these developments are clustered around major U.S. power centers.
“This level of pipeline and capital intensity is unprecedented for what has historically been viewed as a diversified commercial real estate sector,” he explained. “Digital infrastructure is transforming the diversified commercial real estate sector into a more systematically concentrated infrastructure risk, and reinsurance needs to evolve from transactional capabilities to structural capital structures.”
Goodman emphasized that while the nature of the asset class itself is not new, the extent of risk exposure has changed significantly.
At the same time, he noted that there is significant funding available to support the industry. “Globally dedicated reinsurance capital exceeds $650 billion and is growing at approximately 10% annually,” Goodman said. “About $125 billion of that capital now comes from other sources – pension funds, sovereign wealth funds, institutional investors – all looking to diversify across asset classes.”
“So, the problem is not a lack of funds,” he added. “The question is how we deploy and structure capital efficiently and wisely.”
Ultimately, Goodman believes that “digital infrastructure represents one of the most significant capital deployment opportunities in the reinsurance market in a generation,” but he is quick to note that some shifts are taking place.
One of the most important structural changes involves the way large data center campuses are developed. “These large AI campuses are clustered around power nodes that are constrained,” Goodman said. “These campuses share transmission infrastructure, substations, cooling systems, and often similar supply chains.”
This interconnected infrastructure means a single failure can affect multiple sites simultaneously. “A single renovation, grid outage or extreme weather event can impact multiple campuses simultaneously,” he explains. “Given the size of these hyperscale campuses, the severity of losses increases significantly, including property damage, startup delays and business disruption.”
As a result, reinsurers are increasingly assessing risk at the ecosystem level rather than focusing on individual facilities. “Increasingly, reinsurers are underwriting these ecosystems, not just individual buildings,” Goodman said. “Data centers are no longer just large buildings, but centralized power ecosystems.”
The market began to respond with new insurance structures. Goodman pointed to “portfolio allocations, sponsored risk pools and co-structures backed by quota shares and collateralized reinsurance” as examples of how capital can be deployed more efficiently across multiple projects.
Another development involves a building portfolio project. “We are also seeing innovation in the construction space. Portfolio builder risk plans can pre-define qualification criteria, engineering standards and risk controls for multiple projects,” he said. This approach allows developers to put multiple builds under one framework, rather than building separate fuses for each project. “As projects scale, the insurance program must scale with it structurally, not incrementally,” Goodman noted.
Goodman concluded his remarks by saying: “The market is not abandoning digital infrastructure, but is innovating around it. With more than 1,500 projects globally, dozens of them worth more than $750 million, digital infrastructure has become systemically important and the strategic impact on the reinsurance industry is clear. It is one of the largest opportunities for capital deployment, but it requires a change in mindset from transactional allocation to structural capital architecture. From insuring buildings to underwriting interconnected infrastructure systems.”
“The opportunity is huge. The capital is there. The challenge is our ability to build intelligently, tightly manage aggregation, and align deployments with multi-campus growth pipelines. As digital infrastructure scales, venture capital must evolve from being deployed annually to a strategic capital structure.”
Post-digital infrastructure is one of reinsurers’ biggest opportunities: Guy Carpenter’s Goodman appeared first on ReinsuranceNe.ws.
