US insurers have been pouring capital into data center projects that carry investment-grade ratings while the facilities are still under construction. The National Association of Insurance Commissioners has begun asking whether those ratings are justified - and it now has the authority to say they are not.
The NAIC - the body that seeks to unify state-level insurance regulation - is reviewing insurers' data center holdings and examining the credit ratings underpinning these projects, according to people familiar with the matter cited by the Financial Times. The scrutiny comes as insurance capital plays a growing role in the national AI infrastructure build-out, with many early-stage projects securing institutional investment on the strength of ratings that have not yet been tested by operational reality.
"The NAIC's Securities Valuation Office reviews investments across a wide range of asset types and sectors, including data centres, as part of its ongoing work on behalf of state insurance regulators," the NAIC told the Financial Times in an email statement.
The review will evaluate the creditworthiness of data center tenants, the exit clauses of leasing contracts, and construction companies' records including project delays and cost overruns, according to one of the people cited by the FT. Each of those factors speaks directly to the gap between a rating assigned at origination and the credit quality that actually materializes once a facility is built, occupied, and generating revenue.
Those credit ratings are mostly privately issued but are required to be filed with the NAIC as part of the process that determines insurance companies' capital requirements - with insurers holding lower-quality investments required to maintain larger capital reserves. The rating, in other words, is not just a label. It determines how much capital an insurer must hold against the position, and therefore how attractive the investment appears on a risk-adjusted basis.
Since January, the NAIC has held the power to challenge and override credit ratings where they differ from its own analysis by more than three rating notches, covering both public and private ratings. That authority - known as the discretion amendment - was adopted at the NAIC's Fall 2024 meeting and took formal effect on January 1, 2026, according to Capstone DC's regulatory analysis.
The tension the data center review makes visible is a direct consequence: 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 ratings on which that attractiveness depends.
The data center probe is the latest development in a broader regulatory push targeting private asset quality across the insurance sector. Bonds with private placement numbers made up 23.4% of insurers' total admitted bonds in 2025, up from 18.3% in 2021, according to S&P Global Market Intelligence. About 20% of US life insurers' fixed-income portfolios are linked to private and illiquid bonds, according to Moody's Ratings cited by the FT - an exposure level that has already begun turning some investors away and driving up borrowing costs in recent months.
The NAIC restructured its investment oversight apparatus at the start of 2026 in direct response to this growth. The Valuation of Securities Task Force was reorganized into four groups - the Invested Assets Task Force, the Investment Analysis Working Group, the Investment Designation Analysis Working Group, and the Credit Rating Provider Due Diligence Working Group - according to the NAIC. The Credit Rating Provider Working Group held its first open meeting in late March 2026 to develop a framework for how the NAIC evaluates the rating agencies it relies on, according to S&P Global Market Intelligence.
Last month, US Treasury Secretary Scott Bessent met with state insurance commissioners to discuss regulatory responses to life insurers' increased exposure to private assets. "Secretary Bessent emphasised the need for fit-for-purpose regulation that encourages innovation while appropriately managing risk," the Department of the Treasury said in a statement in May.
For a life insurer sitting today on a book of construction-stage data center debt, the NAIC's review introduces a specific and practical risk: that a rating challenge results in a downward designation change, triggering a higher capital charge against an investment that was sized and priced on the original rating. The larger the position and the thinner the capital buffer above minimum requirements, the more disruptive that outcome would be.
The direction of travel is clear. The NAIC was expected to push toward more closely scrutinizing third-party credit ratings of complex securities held by insurers throughout 2026, according to Capstone DC's January 2026 outlook - and the data center review confirms that expectation. For insurers and their investment teams, the question is no longer whether the regulatory baseline for private credit is tightening. It is whether their current holdings, and the ratings underpinning them, are robust enough to survive the scrutiny that is now formally underway.
