Finance the AI infrastructure opportunity. Insure the risk.
Artificial intelligence requires enormous investment in GPUs, data centres and high-performance computing infrastructure.
As businesses, lenders and investors finance this expansion, new risks are emerging around GPU depreciation, technological obsolescence, private debt and capital raising, customer contracts and the infrastructure supporting AI compute.
Elmore helps businesses, lenders and investors understand these exposures and structure insurance around the financial and operational risks of AI infrastructure.
AI is changing infrastructure finance
The rapid development of artificial intelligence is creating demand for increasingly powerful computing infrastructure.
GPU clusters and data centres can require substantial upfront investment, increasingly supported by private credit, equipment finance, asset-backed lending and other structured financing arrangements.
But GPUs are unusual financial assets.
Their value can be affected by new generations of hardware, changes in performance and energy efficiency, secondary-market demand, utilisation and the commercial life of the technology they support.
At the same time, investors and lenders can be exposed to the financial strength of operators and customers, the accuracy of information provided during a capital raise and the operational performance of the underlying infrastructure.
Traditional Property, Cyber, D&O and liability insurance may address parts of this exposure, but they do not necessarily protect the financial risks associated with financing AI infrastructure.
Elmore helps identify these gaps and structure appropriate insurance solutions.
For businesses acquiring and operating GPUs, high-performance computing infrastructure and AI data centres.
Insurance can help protect the assets and operations supporting substantial infrastructure investment while also addressing liabilities associated with raising capital to finance expansion.
Typical organisations include:
- GPU cloud and neocloud providers
- AI infrastructure companies
- High-performance computing providers
- Data centre operators
- AI model and platform providers
- GPU-as-a-Service businesses
- Technology infrastructure companies
For organisations providing debt, leasing, private credit or other forms of capital to AI infrastructure businesses.
Insurance can potentially address specific risks affecting the value, repayment or structure of a financing.
Relevant organisations can include:
- Private credit funds
- Banks
- Equipment finance providers
- Infrastructure funds
- Asset managers
- Institutional investors
- Lessors
- Structured finance providers
GPU depreciation and technological obsolescence
Offering and disclosure liability
Borrower default
Customer and offtaker failure
Physical loss or damage
Cyber and technology failure
Business interruption
Construction, installation and deployment
How can AI infrastructure financing risk be insured?
AI infrastructure financing risk does not sit within one insurance policy.
Elmore can review the financing structure, underlying assets, counterparties and operational dependencies to identify where established and emerging insurance solutions can respond.
Private Offering Insurance
Protection against liability arising from a private capital raise or debt offering.
Cover can protect against claims alleging misstatements, omissions or other wrongful acts in offering documents and information provided to investors, subject to the policy terms.
For GPU and AI infrastructure financing, this can be particularly relevant where investors are relying upon representations concerning asset values, customer contracts, utilisation, projected revenues and the underlying technology.
GPU Residual Value Insurance
Residual Value Insurance can potentially establish an insured floor beneath the future value of financed GPU assets.
Where the realised value of eligible GPUs falls below an agreed insured residual value, the policy may respond to the defined shortfall, subject to the structure, valuation methodology and policy terms.
This can potentially reduce part of the collateral-value risk associated with technological obsolescence and accelerated depreciation.
GPU Residual Value Insurance is an emerging specialist market and availability, limits and structure will depend upon the assets, financing and available underwriting capacity.
Credit and non-payment insurance
Insurance can potentially protect against defined losses arising from borrower or counterparty non-payment.
For AI infrastructure financing, this could include exposures to operators, customers or other counterparties whose payment obligations support the financing.
Property and equipment insurance
Protection for GPUs, servers and associated infrastructure against insured physical loss or damage.
Coverage can extend across different stages of the asset lifecycle, including transit, installation and operation.
Cyber insurance
Protection against cyber events affecting AI infrastructure, networks, systems and data.
Cover can include incident response, restoration costs, third-party liability and business interruption following an insured cyber event.
Business interruption and operational risk
Insurance can protect against certain losses resulting from interruption to the physical and technological infrastructure required to operate GPU capacity.
Appropriate cover will depend upon the data centre, power, cooling, network and other dependencies supporting the operation.
AI Infrastructure & GPU Financing Insurance FAQs
What is GPU Residual Value Insurance?
GPU Residual Value Insurance is an emerging form of insurance intended to protect against defined deterioration in the future value of GPU assets.
A policy can establish an agreed insured residual value. If eligible GPUs are worth less than that amount at the relevant point in the financing, insurance may respond to some or all of the insured shortfall, subject to the policy structure and terms.
It is particularly relevant where GPUs are being used as collateral for debt, leasing or other financing arrangements.
Why is GPU residual value a risk?
GPU technology is developing rapidly.
New generations of hardware can provide improvements in computing performance, memory capacity and energy efficiency, potentially affecting demand and secondary-market values for previous generations.
Financiers therefore need to consider not only the current value of GPU collateral but how that value could change during the life of the financing.
Can GPU Residual Value Insurance increase the amount a lender will finance?
Potentially.
Where an insurer assumes a defined portion of residual-value risk, this may provide additional protection to a lender against deterioration in the value of its collateral.
Whether this affects advance rates, pricing, tenor or other financing terms will ultimately depend upon the lender, insurance structure, insurer credit quality and transaction.
What is Private Offering Insurance?
Private Offering Insurance is a transaction-specific liability policy designed to protect against claims arising from a private securities or debt offering.
It can provide protection where investors allege that offering documents contained misleading statements, errors or omissions, subject to the policy terms.
For businesses raising capital to acquire GPUs or develop AI infrastructure, it can form part of the wider risk-management framework surrounding the financing.
Does Private Offering Insurance protect the value of the GPUs?
No.
Private Offering Insurance protects against defined liabilities arising from the capital raising or offering process. It does not guarantee the future value of the underlying GPU assets.
Residual-value risk requires a separate insurance structure.
The two covers can therefore address different risks within the same financing transaction.
Can a lender be insured?
Potentially.
The appropriate insured parties depend upon the financing structure and the type of insurance being arranged.
Elmore can work with borrowers, lenders, investors and their advisers to understand the allocation of risk within a transaction and determine where insurance may be appropriate.
What information will insurers want to know?
Underwriters may consider:
- GPU manufacturer, model and generation
- Number and value of GPUs
- Purchase price and acquisition date
- Financing amount and tenor
- Loan-to-value or advance rate
- Proposed residual value
- Independent valuation methodology
- Expected technological lifecycle
- Secondary-market liquidity
- GPU utilisation
- Customer and offtake contracts
- Counterparty credit quality
- Data centre locations
- Power and cooling infrastructure
- Security and cyber controls
- Asset monitoring and maintenance
- Offering and financing documentation
- Financial projections
- Exit and asset disposal strategy
Can different insurance policies be combined around one GPU financing?
Yes.
A significant AI infrastructure financing can create several distinct exposures rather than one insurable risk.
Depending upon the transaction, an insurance programme could incorporate Private Offering, Residual Value, Credit, Property, Cyber and Business Interruption insurance.
Elmore can review the transaction as a whole and identify where different insurance products can support the allocation and transfer of risk.
Want to discuss your AI infrastructure financing?
Whether you are raising capital, financing GPUs, lending against AI infrastructure or investing in compute capacity, Elmore can help identify the financial and operational risks within the transaction and explore appropriate insurance solutions.