Meta and BlackRock’s $14bn data centre exposes lenders to insurance gap - FT中文网
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Meta and BlackRock’s $14bn data centre exposes lenders to insurance gap

Investors in gigawatt-scale campuses face billions in underinsured risks as insurers balk at cost of full coverage
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{"text":[[{"start":9.32,"text":"A new Texas data centre campus owned by Meta and BlackRock is on the hook for huge losses in the event of catastrophic events, creating credit risks for lenders, as only a fraction of the AI mega-project is fully covered by insurance."}],[{"start":21.94,"text":"The $14bn data centre in El Paso, Texas — known as Sopaipilla — has secured hundreds of millions of dollars of insurance coverage on the advice of the world’s biggest insurance broker, Marsh, according to people familiar with the agreements."}],[{"start":35.12,"text":"But the purchased coverage leaves the sprawling one-gigawatt facility exposed to billions of dollars in possible losses above those caps on insurance coverage, which range from terrorism to property damage and legal liability, the people said. The project is not insured against a total loss. Such coverage has become prohibitively expensive for lenders amid a shortage of insurance for massive AI projects."}],[{"start":58.4,"text":"Under terms advised by Marsh, the venture will have up to $218mn in coverage for rent abatement if construction is delayed and $645mn in coverage against terrorism."}],[{"start":69.88,"text":"The venture will pay about $5mn for all-risk property insurance coverage of up to $427mn during construction and $450mn once the centre is in operation, increasing each year by 2 per cent. It has also obtained commercial general liability cover for an annual premium of about $1mn for a policy with a limit of $50mn per individual event and $50mn in aggregate."}],[{"start":94.16,"text":"The coverage leaves the venture liable for losses above those levels. Data centres and the valuable technology they contain are exposed to property damage from natural disasters, as well as financial threats such as lawsuits over their environmental impact and over delays to expected start-up dates."}],[{"start":109.84,"text":"Marsh, Meta and BlackRock all declined to comment."}],[{"start":114.16,"text":"Policies for the project were agreed as the insurance sector struggles to assemble sufficient cover for data centres, a fast-growing asset class where campuses and the specialised computer chips they contain are frequently valued in the tens of billions of dollars."}],[{"start":127.04,"text":"Lenders to smaller data centres usually demand full insurance, but as deal sizes have grown, partial coverage has become more acceptable."}],[{"start":134.04,"text":"Although dozens of commercial insurers have signed up to cover risks at these campuses, most have been reluctant to build large aggregate exposures to individual sites, which could face losses from natural catastrophes, power outages or lawsuits for failing to hit aggressive completion timelines."}],[{"start":150.94,"text":"In response, brokers have advised lenders and developers on estimated “probable maximum losses” from a single catastrophe and counselled them to agree to accept losses above these levels rather than securing cover for the total possible losses they could incur."}],[{"start":167.72,"text":"Ahead of Sopaipilla’s bond sale in July, BlackRock executives reassured potential lenders that severe weather events are rare in the El Paso area and that modern disaster-proof data centres are unlikely to suffer total losses even during catastrophes, people familiar with the matter said."}],[{"start":185.8,"text":"Marsh’s “probable maximum losses” estimate for the Meta project is based on a 1-in-250-year to 1-in-500-year fire that affects the region, the people said. This means that there is a roughly 3.9 to 7.7 per cent chance that such an event would occur at least once during Meta’s total lease term of 20 years."}],[{"start":206.04,"text":"“In case the final insurance payout doesn’t cover everything, Meta has to pay the gap” up to $450mn, said Viviane Gosselin, an analyst at S&P, which assigned the debt on the Sopaipilla project an A-plus credit rating. This is one notch below Meta’s own rating, largely because debtholders do not have a direct claim on the project’s physical assets."}],[{"start":227.44,"text":"Meta could also terminate the lease, which underpins the debt value, without any penalty if the site suffered from a severe casualty event that caused a project delay of more than 18 months, S&P noted."}],[{"start":239.98,"text":"Insurance brokers have played a crucial role in data centre projects, with their assessments forming the basis for pristine ratings from credit rating providers. Fitch and KBRA assigned double A-minus ratings to the Sopaipilla deal, the same as Meta’s corporate rating."}],[{"start":254.92,"text":"Marsh and Aon are among the large brokers that have launched data-centre advisory businesses, seeking to help companies buy hundreds of millions of dollars in insurance coverage."}],[{"start":264.34,"text":"But the role of insurance brokers has also come under criticism, with some legal advisers warning that these groups could be conflicted, since they can both advise multiple parties on, and arrange for, the sale of insurance to cover expected risks."}],[{"start":280.16,"text":"“Certain brokers are involved in transactions advising several different project participants, acting as both a broker and an adviser,” Marc Norman, an insurance recovery lawyer at Covington who works on data centres, told the FT."}],[{"start":293.64,"text":"“So there seems to be a conflict, not just in terms of multiple representation, but also the role of advising whilst also being a seller.”"}],[{"start":302.92,"text":"Additional reporting by Eric Platt in New York"}],[{"start":311.08,"text":""}]],"url":"https://audio.ftcn.net.cn/album/a_1786969086_7466.mp3"}

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