Financial institutions providing capital for the AI infrastructure boom are warning that a two month construction lag could cost builders $300 million in fines. The escalation of these costs has prompted insurance brokers including Marsh to launch specialized “delay-in-delivery” policies to protect developers from defaults as lenders grow increasingly concerned about the risk to projects backed by heavily borrowed money.
The surge in risk follows a shift in lease terms where tenants now demand daily late fees exceeding $5 million, compared to about $1 million a day this spring. Data center insurance premiums are forecast to reach $24 billion by 2030 as developers navigate these penalties. Waldemar Szlezak of KKR warned that the financial pressure from late fees may result in more developer bankruptcies than rising interest rates.