Exploring credit risk cover
Barclays is assessing appetite among insurers to provide credit risk cover for more than $10 billion of loans intended to finance artificial intelligence infrastructure. According to people familiar with the matter, the lender is looking for insurers to cover more than 50% of the credit risk on some AI-linked facilities. The London-based bank aims to create capacity for further lending as hyperscaler funding needs grow. Discussions remain exploratory and final decisions on the size and timing of potential deals have not yet been made. A representative for Barclays declined to comment.
Capacity constraints in the insurance market
Banks frequently use credit risk insurance, alongside derivatives, loan sales, and significant risk transfers, to share loss risks and free up regulatory capital for new business. However, capacity among credit risk insurers to underwrite data center finance may be tightening. A Willis Towers Watson survey released in May indicated that several non-trade credit risk insurance providers were approaching sector limits or were already full on data center exposure. Global spending on data centers is projected by McKinsey & Co to reach $6.7 trillion by 2030, increasing pressure on debt financing markets.