Insurers are increasingly tapping private capital and hedge funds through catastrophe bonds to cover billions in potential data center damages, as traditional insurance falls short amid the AI boom. Brokers like Guy Carpenter and Aon are setting up special-purpose vehicles to address coverage gaps for projects valued at tens of billions of dollars.

These financial instruments offer yields at least 2 percentage points above government bonds, attracting alternative investors. The bonds cover risks from natural disasters to cyber attacks, with potential coverage up to $1bn per data center or portfolio. Lenders worry about fire, flood damage, and loss of high-value chips.

Data centers represent strategic assets facing uncertain long-term demand and geopolitical risks, making them attractive targets for attacks. Investors specializing in riskier assets find these securities appealing despite volatility. The trend reflects how insurers are adapting to cover critical infrastructure in an increasingly complex risk environment.