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Meta Data Center Faces Billions in Uninsured Risk
17 Aug
Summary
- El Paso data center has $14bn value with only partial insurance.
- Billions in losses are possible above insurance coverage caps.
- Insurance for massive AI projects is increasingly expensive.
A massive $14bn data center campus in El Paso, Texas, co-owned by Meta and BlackRock, faces substantial financial exposure. The facility, known as Sopaipilla, has secured hundreds of millions in insurance coverage, but this amount falls short of protecting against potential catastrophic losses, leaving billions of dollars unprotected. Such comprehensive insurance has become prohibitively expensive for lenders given the high value of AI infrastructure.
Policies advised by Marsh provide up to $218mn for rent abatement and $645mn for terrorism. All-risk property insurance during construction is capped at $427mn, increasing annually after operation. However, the venture remains liable for any losses exceeding these limits, including those from natural disasters, environmental lawsuits, or project delays. This lack of full coverage poses a credit risk to lenders, despite assurances that severe weather is rare in El Paso.
Recent actions show Meta could be responsible for gaps up to $450mn if final insurance payouts are insufficient. Credit rating agencies have assigned high ratings, but with caveats for debtholders lacking direct claims on physical assets. The insurance sector itself struggles to provide adequate coverage for the booming data center market, leading brokers to advise accepting higher probable maximum losses rather than seeking full coverage.
