Investor Launching $1B Fund For Data Center Catastrophe Risk

Ashburn Virginia data centers

Alternative investor Euler ILS Partners plans to launch the first insurance-linked securities project specifically for environmental risks to data centers.

Euler ILS Partners is working with an insurance company to underwrite specialist policies for data centers' catastrophic risk, Bloomberg reported.

Weather-related hazards like tornadoes and rising temperatures are expected to be major risks, especially in areas where many data centers have clustered within a 20-mile radius, like Texas and Virginia.

Euler launched in 2024, formed out of a management buyout of Credit Suisse Insurance Linked Strategies Ltd. It is aiming for $1B in investment and expects the institutional fund will offer returns over 15%, Euler Chief Investment Officer Niklaus Hilti told Bloomberg.

There are already plenty of insurance-linked securities that aim to offset catastrophic risk to residential property. The issuance of those types of bonds grew about 24% last year, Bloomberg reported.

Investors are looking at the growing data center landscape, including where those facilities are often built, and seeing a major disconnect between the insurable values and what insurers might be willing to sign up for.

An S&P Global report this month anticipates "capacity constraints" for insurers as values for some hyperscale data centers reach as much as $30B, dwarfing the $10B that might be expected to insure a major infrastructure project like a bridge or tunnel.

"The increasing demand for large, specialized, power-intensive campuses is creating a meaningful growth opportunity for the global re/insurance industry," the report's authors wrote.

Data center construction starts globally went from $60B in estimated completed value in early 2020 to $340B about five years later, according to an MSCI Real Capital Analytics report published in April.

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