India’s rapid data-centre expansion is creating concentrated risks across power, construction, water, cyber and operations, according to new research from Howden. The findings highlight the need to assess these exposures together rather than treating them as separate insurance risks.
The scale of expansion is significant. Power consumed by data centres built in India increased 68-fold between 2016 and 2025, at a compound annual growth rate of about 60%. Demand is projected to reach 57 terawatt-hours by 2030. Maharashtra, Telangana and Karnataka account for approximately 70% of India’s data-centre capacity, creating geographical concentration in critical infrastructure.
Power Becomes a Critical Risk
Power infrastructure has emerged as the most significant risk factor. The challenge is not simply generating enough electricity but ensuring reliable grid connections, adequate substation capacity and sufficient redundancy.
Energy represents approximately 65% of data-centre operating costs, making reliable power essential to commercial viability. Some hyperscale operators are therefore turning to on-site, behind-the-meter generation to improve reliability. However, this can introduce additional equipment, maintenance and fire exposures that insurers need to consider.
Construction Creates Business Interruption Risk
India added approximately 7 million square feet of data-centre space in 2025. The average size of a new facility increased from around 59,000 square feet in 2016 to 276,000 square feet in 2025, concentrating substantially greater asset values at individual locations.
The challenge is likely to continue. Planned expansion between 2026 and 2030 is equivalent to 78% of the current footprint of existing data centres.
Construction alongside live, high-value operations creates additional risks of physical damage and business interruption, particularly during testing and commissioning. The research therefore calls for construction and operational exposures to be assessed within a single risk-management programme.
Redundancy Does Not Remove Outage Risk
More than 90% of Indian data centres have redundancy in systems such as uninterruptible power supplies, generators and cooling infrastructure. Yet redundancy does not eliminate the possibility of outages.
Some failures may cause no physical damage, meaning they may fall outside conventional property insurance triggers. This creates potential coverage gaps and is contributing to interest in alternative solutions such as parametric insurance.
The interconnected nature of data centres creates another concern. A single cyber compromise can potentially affect systems and workloads belonging to hundreds of thousands of tenant organisations. Interconnected tenants can also create opportunities for lateral movement following a cyber incident.
Water Adds Another Constraint
Water availability is another emerging risk because many Indian data centres are located in urban areas where water resources are already under pressure.
Cooling a 1 megawatt data-centre facility can require around 25.5 million litres of water annually, according to the research. Water availability, energy efficiency, renewable-power sourcing and carbon footprint therefore need to be considered during site selection and planning rather than after construction.
Implications for Insurance
For insurers and reinsurers, the expansion creates a complex combination of property, business interruption, cyber, construction, power and environmental exposures.
Traditional underwriting approaches that examine each risk independently may not adequately capture the potential for one failure to affect several systems simultaneously.
Data-centre insurance therefore increasingly requires location-specific power assessments, dependency mapping, scenario analysis, cyber-risk assessment and evaluation of concentration risks.
The growth of artificial intelligence is likely to add further pressure because AI workloads require substantial computing capacity and can increase power density and infrastructure requirements.
The broader lesson is that India’s data-centre expansion is creating not only more infrastructure but also larger concentrations of insurable value and interconnected risk. For insurers, risk assessment needs to begin at site selection and continue through construction and operations.
As data centres become increasingly critical to India’s digital economy, ensuring their resilience will require closer integration of engineering, operational risk management, cybersecurity, climate considerations and insurance protection.
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