From the Desk

The data center buildout is top of mind for communities across the U.S. and the recent midterms underscored that. Politicians tend to run on broad themes. Fortunately, most bipartisan policy implementation follows a more challenging process – of balancing economic and social issues to deliver what’s needed.

All permitting for the 2027 buildout has already been approved. So, potential building delays and interruptions are a 2028 issue. Texas, Ohio and Georgia are the top three destinations for new projects and will be run by incoming Democratic governors. Texas is by far the largest venue.

Incoming Texas Governor-elect Gina Hinojosa has been very clear on her approach. There will be no ban, just fair protection for households. Also highlighted is that all permitted data centers would be allowed to finish as the state decides guidelines for future construction. Her message is that economic development and protection for Texans are not mutually exclusive.

Data centers bring jobs and tax revenues. Numerous water studies have argued that less-rigorous research quoted in the press has overstated consumption concerns, while recycling technologies can also greatly reduce consumption. Many analysts contend that data centers have a favorable environmental tradeoff compared to alternatives like manufacturing, that usually come with the added burden of heavy truck traffic.

The future of data centers is not as bleak as campaign rhetoric has suggested. But the industry needs to be transparent and pay its fair share. And politicians need to be clear in communicating that to households.

Sources: Bloomberg, The Financial Times, 2026.

Less than a week after the midterm elections, the outgoing Congress advanced a potentially significant piece of proposed energy and infrastructure legislation. On Monday, the Senate voted 73–25 to move the Bipartisan American Affordability and Jobs Act (BAAJA) to the floor for debate.

BAAJA is a sweeping legislative package intended to shorten and simplify federal approvals for energy and other infrastructure. Clean energy proponents tout the bill’s provisions to protect projects with permits already in place – a key component given the Trump administration’s efforts to block offshore wind – and accelerate transmission development. This could enable more renewable energy projects to connect to the grid. The oil and gas industry is praising the bill’s scaling back of some reviews, as well as the bill’s constraints on states’ ability to block new projects. The complexity of the 400-plus page bill – which covers everything from geothermal to nuclear to wind to gas – means its ultimate emissions impact is uncertain.

Given surging electricity demand from AI, the bill includes several measures aimed at data centers. BAAJA would force AI data centers to pay for new transmission infrastructure required to serve them, while still paying full cost to use the rest of the grid. It also opens up the ability for states to require the facilities to subsidize other customers’ power rates. A new Data Center Community Assistance Program will be launched, to support local communities in evaluating water and energy impacts of new projects.

BAAJA is the latest in a multi-year effort to reach a bipartisan agreement on permitting reform. President Donald Trump has publicly backed the bill, but passage is not guaranteed. The Senate is now considering the legislation and potential amendments. A final Senate vote and approval by the House would still be required before the bill could reach the President’s desk.

Sources: Bloomberg, Heatmap, The New York Times, 2026.

The Government of Canada has tabled its 2026 federal budget, which contains measures that will impact Canadian insurers. Specifically, the budget proposes to amend the Insurance Companies Act and the Investments in Permitted Infrastructure Entities Regulations to broaden the infrastructure investments permitted for federally regulated life insurers.

The current framework is restrictive on several fronts, particularly for equity investments. Currently, infrastructure investments face several hurdles, including public-sector involvement, dedicated infrastructure entities, restrictions on fund investments and an asset-liability management requirement. As a result, life insurers have largely accessed Canadian infrastructure through debt rather than equity.

This proposal complements 2025 changes to the Life Insurance Capital Adequacy Test (LICAT) of the Office of the Superintendent of Financial Institutions (OSFI). The changes cut the capital charge on qualifying infrastructure equity from 40% to 30% and on unrated domestic debt from 6% to 3% for Canadian assets. Because that relief is defined by reference to the same regulations, a broader definition should extend lower charges to a wider set of assets.

According to the Canadian Life and Health Insurance Association (CLHIA), Canadian life and health insurers already have C$51 billion invested in domestic infrastructure. For life insurers, a broader framework could expand the infrastructure opportunity set and provide greater flexibility to access assets that support long-term portfolio objectives.

Scope and timing will follow through implementing legislation and draft regulations, and we will share our assessment as details are published. In theory, regulatory implementation could move forward relatively quickly (less than one year), with the caveat that government timelines are always challenging to predict.

Sources: Budget 2026, Canadian Life and Health Insurance Association.