Banks have reached their limit in AI loans: Risk is being shifted to insurers

Banks financing AI data centers have hit exposure limits and are shifting risk to insurers as borrowing demand outpaces their capacity to hold loans, with 20-50% of risk transferred on some projects. Insurance premiums on these credit protections have climbed to as much as 70% of the income earned on the hedged loans, signaling how aggressively lenders are offloading exposure. The shift matters because it moves a fast-growing slice of AI infrastructure debt off bank balance sheets and into insurers, potentially concentrating systemic risk in a less-visible corner of finance. Investors should watch whether premium costs keep rising and whether insurers absorb further transfers as data-center borrowing continues to scale.