Insurers Are Funding the AI Data Center Boom — and the NAIC Wants to Know if the Ratings Hold Up

US insurers have become major financiers of the artificial intelligence infrastructure boom, channelling billions of dollars into private-credit and structured securities backing the construction of data centers and related infrastructure. Now the National Association of Insurance Commissioners (NAIC) — the coordinating body for US state insurance regulators — is asking a pointed question: are the credit ratings on those complex assets robust enough to survive regulatory scrutiny?

At the centre of this regulatory push is the 'discretion amendment,' adopted at the NAIC's Fall 2024 meeting and effective January 1, 2026. The amendment empowers the NAIC's Securities Valuation Office to challenge and override third-party credit ratings — both public and private — where they differ from the NAIC's own analysis by more than three rating notches. This authority covers filing-exempt securities including corporate bonds and structured products, fundamentally changing a system in which insurers could previously rely on Nationally Recognized Statistical Rating Organization ratings to determine their regulatory capital charges.

The tension is structural and, as Insurance Business observed, somewhat self-created. The NAIC helped shape the regulatory conditions that made private, investment-grade-rated infrastructure debt attractive to insurers — and it is now empowered to challenge the very ratings on which that attractiveness depends. A recent NAIC review focused specifically on data center financing makes the friction visible: roughly $670 billion in planned US data centers face elevated physical risks, including high storm exposure, raising questions about whether the credit ratings on the debt funding them fully capture those risks.

The scale of insurers' private-credit exposure underscores why regulators are concerned. Bonds with private placement numbers made up 23.4% of insurers' total admitted bonds in 2025, up sharply from 18.3% in 2021, according to S&P Global Market Intelligence. About 20% of US life insurers' fixed-income portfolios are now linked to private and illiquid bonds, per Moody's Ratings. The data center probe is the latest development in a broader 2026 regulatory campaign targeting private asset quality across the insurance sector — one that also includes a holistic review of the risk-based capital framework and the restructuring of the NAIC's Valuation of Securities Task Force into four specialised working groups. For insurers and their investment teams, the question is no longer whether the regulatory baseline for private credit is tightening, but whether their current holdings — and the ratings underpinning them — can withstand the scrutiny now formally underway.