NAIC Reviews Insurers' Data Centre Holdings and the Credit Ratings Behind Them as Private Bonds Reach 23.4% of Admitted Bonds

Insurers have become major funders of the artificial intelligence building boom, and state insurance regulators want to know whether the credit ratings on that lending can be trusted. According to Insurance Business, which cites reporting by the Financial Times, the National Association of Insurance Commissioners (NAIC) is reviewing insurers' data centre holdings and the credit ratings behind them. This article summarises that report. An earlier version of this article said the NAIC held the power to override ratings that differ from its own by more than three notches from January 1, 2026, without noting a later development. The Insurance Business report states that power has applied since that date, but KBRA's research release of June 8, 2026, says the amendment's original January 2026 implementation has been delayed. The two statements conflict, and we have not been able to resolve the difference, so readers should check the NAIC's current position.

What is the NAIC looking at? According to the report, the review covers tenant creditworthiness, lease exit clauses and construction firms' records on delays and cost overruns. These are the factors that determine whether a data centre will generate the cash flow needed to repay its lenders. A data centre leased to a strong technology company on a long lease is a different credit from a speculative building with a short lease or a tenant that can leave. The concern, the report says, is that ratings assigned during construction may not match the credit quality of finished, operating facilities.

Why does the rating matter? Ratings affect how much capital insurers must hold against a bond. A higher rating means a lower charge. If a rating were lowered after review, the insurer could face a higher capital charge on a large position. KBRA's research explains that such a charge would not itself be a loss on the bond, but it would reduce the insurer's capital ratio unless it raised more capital. That distinction is central to the debate about how closely regulators should scrutinise private ratings.

What is the discretion amendment? The report says that, from January 1, 2026, the NAIC can challenge and override credit ratings that differ from its own analysis by more than three notches. The power is described as covering public and private ratings. KBRA describes the amendment as adopted in August 2024, allowing the NAIC's Securities Valuation Office to review and challenge ratings it does not consider a reasonable measure of risk. The difference between the descriptions, including whether a three-notch threshold applies, is one that readers should check against NAIC documents.

How big is the private bond market for insurers? S&P Global Market Intelligence, cited in the report, says privately placed bonds made up 23.4% of insurers' admitted bonds in 2025, up from 18.3% in 2021. Moody's estimates that about 20% of US life insurers' fixed income portfolios are tied to private and illiquid bonds, a figure that other reporting on this site puts at $807 billion at the end of 2025. The two measures use different definitions, so the percentages are not directly comparable, but both show that private assets are a large and growing part of insurer balance sheets.

What are other authorities doing? The report says that Treasury Secretary Scott Bessent has met state insurance commissioners on the issue. In a statement in May, the Treasury called for fit-for-purpose regulation that balances innovation and risk. Moody's has said that regulators are paying more attention to transparency in portfolios. The NAIC's president, Scott White, has been quoted in other coverage as saying that transparency in life insurance portfolios is a top 2026 priority.

What does this mean for the AI boom? Data centres need very large amounts of capital, and long-term lenders such as life insurers are natural providers of it. The scrutiny does not mean that the loans are in trouble; the reports do not claim that any insurer has suffered a loss on a data centre investment. Rather, the question is whether the rating on a loan during construction reflects the risk of the finished asset, and whether the capital held against it is appropriate. If the review leads to tighter treatment, insurers might demand higher yields, shift to other assets or raise capital, with effects that would show up gradually.

The review also illustrates a wider shift. Insurers once held mostly public corporate and government bonds that anyone could price from market quotes. As they move into private loans, project finance and structured deals, regulators and ratings users depend more on the quality of the underlying credit analysis, which is harder for outsiders to check. That is why transparency and disclosure feature so heavily in current regulatory discussion.

For policyholders, the main point is that insurers' investments matter to their long-term security, and regulators are paying attention. Customers who want more detail can look at an insurer's financial strength ratings and its public disclosures about private and structured assets. This article reports published information, not a forecast, and is not investment advice.