India’s rapidly expanding data centre industry is creating new challenges for the insurance sector, particularly around power outages, cyber threats, construction activity and water availability.
A new report from global insurance broker Howden says traditional insurance cover may not fully protect operators against some of these emerging risks. More than 90% of India’s data centres have backup UPS, generator and cooling systems, but equipment or system failures that cause no physical damage can still interrupt operations without triggering conventional property cover.
Power and Outage Risks Challenge Insurance
Power infrastructure has become a major insurance risk as India’s data centre capacity grows. The consumption from data centres increased 68-fold between 2016 and 2025, according to S&P data cited by Howden. Demand could reach 57 TWh by 2030.
Energy already accounts for about 65% of data centre operating costs. Maharashtra, Telangana and Karnataka together account for around 70% of India’s data centre capacity, making reliable grid connections, substations and backup power important considerations for insurers.
The industry is also exploring parametric insurance solutions for non-damage outages. Such products can potentially respond to predefined events or performance thresholds rather than relying only on physical damage.
Cyber and Construction Add More Exposure
Cyber risk presents another challenge for insurance providers. Retail and wholesale data centre operators account for about 86% of India’s facilities, according to Howden. A cyber incident affecting an interconnected facility could disrupt services for a large number of tenant organisations.
Construction activity creates another layer of risk. India added about 7 million square feet of data centre space in 2025. The average facility size rose from 59,000 square feet in 2016 to 276,000 square feet in 2025. Planned expansion at existing facilities between 2026 and 2030 equals about 78% of their current footprint.
Construction alongside live operations can increase the risk of physical damage and business interruption, especially during testing and commissioning. Howden therefore recommends that operators consider construction and operational exposures within an integrated insurance programme.
Water availability also requires attention. Cooling a 1 MW data centre can consume around 25.5 million litres of water each year, increasing exposure in urban locations where water resources already face pressure.
Amit Agarwal, CEO of Howden India, said power reliability, construction, cyber concentration and water stress can all affect data centre uptime. As India’s digital infrastructure expands, insurers and operators will need more detailed site-level risk assessments and broader insurance programmes that address property, cyber, power and business interruption exposures together.
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