AI Data Centers Are on Track to Fuel ‘Explosive’ Growth in Captive Insurance
Sat, September 12, 2026 at 2:30 PM GMT+3 5 min read
(Bloomberg) -- A form of self-insurance often associated with mining, oil and other environmentally risky sectors is quietly transforming the market for physical-risk coverage, thanks to the rise of mega AI data centers.
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Captives — whereby firms sidestep traditional insurers and instead set up their own in-house insurance - is emerging as a go-to coverage model for the infrastructure around artificial intelligence, according to Michael Serricchio, US and Canada captive solutions leader at Marsh, the world's biggest insurance broker.
"What you're going to see is an explosive growth in the use of captives to take on the portfolio risks for data centers," Serricchio said in an interview. "Inadvertently, some of the risk for build-outs, construction, surety, property and liability will end up in their captive." He declined to provide details of individual companies, noting the sensitivity associated with such deals.
The development represents a quiet but meaningful realignment of the global risk and insurance landscape. The sheer size and scale of AI data centers often makes them bigger than anything traditional insurers have had to take on before. At the same time, many such facilities are being built in areas where cheap land often comes with weather risks, such as tornadoes, floods and drought.
Oil and gas firms were instrumental in pioneering captives five decades ago, to cover hard-to-insure environmental catastrophes like oil spills. Captives can now be arranged to cover risks spanning everything from natural catastrophes, to liability and workers' compensation.
For companies using captives, part of the appeal lies in their ability to reinvest premiums, rather than having to treat such payments to a third-party insurer as a form of sunk cost.
AM Best, an insurance-focused credit rating firm, says the roughly 150 US captives it rates generated more than $8 billion in savings over the past five years. The ability to turn insurance from "a pure cost center into a potential profit center" is the corporate world's "best kept financial secret," according to Cottingham & Butler, a US insurance broker.
There are currently more than 6,000 captives globally, writing about $240 billion in premiums, which is close to a fifth more than the amount underwritten two years ago, according to data compiled by Captive Review, a trade publication.
"It's been a steady and almost uninterrupted increase," said Joe Peiser, chief executive of risk capital at insurance broker Aon Plc. "Driving it is loss severity — when premiums go up, clients look for ways to manage losses by taking the bottom layer" of the risk.
Marsh says it manages about 1,900 captives for corporate clients, collectively writing about $79 billion of premium, of which only $11.5 billion has been used to buy reinsurance for major risks.
"We have a lot of clients saying to us, 'I've paid property insurance premiums for 10 years, I've never made a claim, and I don't want to do that anymore'," said Serricchio of Marsh.
Hyperscalers are also exploring other forms of risk-retention that aren't captives, but that mirror their purpose. Examples include Meta Platforms Inc., which last year was looking for ways to backstop risk tied to the Hyperion data-center campus, says Charles-Marie Delpuech, a director at S&P Global Ratings.
The Meta facility was "beyond fully-insurable," Delpuech said in an interview. "So they needed another solution to fully mitigate the risk." The structure Meta ultimately went with is "innovative" he said.
Meta ended up providing a special guarantee for the bondholders backing part of the investment, with S&P assigning an A+ rating to the senior secured notes issued by Beignet Investor LLC, which is the name of the special purpose vehicle created by Blue Owl Capital Inc. to help finance its part of the Hyperion deal with Meta.
Meta didn't immediately respond to a request for comment for this article.
S&P says some features of data centers are proving uniquely difficult to insure. For example, there's no obvious coverage product for the high-value graphics processing units, or GPUs, that are housed in every data center, according to S&P. Similarly, even tech firms that buy "business interruption" insurance against the event of a power failure may be subject to a waiting period of 12 to 24 hours before the coverage kicks in, S&P said.
"There's an insurance gap that needs to be solved," said Delpuech. "That's where self-insurance comes in."
The broader development has the potential to create new geographic hubs for arranging and regulating such self-insurance structures. France introduced legislation in 2023 to help launch homegrown captives, while authorities in the UK have been consulting on a tailored and competitive regulatory framework to create a domestic market.
Such developments may end up shifting some business away from traditional hubs like the US, Bermuda and the Cayman Islands.
Captives are no longer seen as niche alternatives, said Adriana Scherzinger, group head of captives at Zurich Insurance. Instead, they now seem to play a critical role in risk financing, capital allocation, and volatility management, she said.
"In data centers, the scale is unprecedented: trillions of dollars will be deployed in the coming years," Scherzinger said. "With capacity already stretched, reinsurers, captives, cat bonds and sidecars will all need to play their part to put the risk capacity in place and keep this growth story running through 2027 and beyond."
--With assistance from Riley Griffin, Sarah Frier and Leonard Kehnscherper.
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