India’s Data Centre Supercycle: Industry Faces Mounting Risks as Expansion Accelerates
India’s digital infrastructure is undergoing a period of explosive growth, but this “data centre supercycle” brings with it a complex web of vulnerabilities. A recent report from global insurance broker Howden, titled “Insuring the Data Centre Supercycle,” warns that the rapid scaling of the sector has created significant concentrated risks across power supply, construction, water consumption, and cyber security.
According to the research, data centre power consumption in India has surged 68-fold since 2016, growing at a staggering compound annual growth rate (CAGR) of 60%. With energy demand projected to hit 57TWh by 2030, the strain on national infrastructure is becoming a primary concern for insurers and operators alike.
The Power Paradox
Power is the most critical risk factor facing the industry, accounting for approximately 65% of total operating costs. While India’s data centre operators have focused heavily on building redundancy, the report identifies the reliability of grid connectivity and substation capacity as the real bottlenecks.
As hyperscale campuses increasingly turn to on-site, behind-the-meter power generation to guarantee stability, the traditional underwriting risk profile is shifting. Insurers are now forced to shift their focus toward location-specific resilience assessments, as energy security becomes a commercial necessity rather than just an operational goal.
Construction Risks at Active Sites
The scale of physical infrastructure has expanded dramatically, with India adding 7 million square feet of data centre space in 2025 alone. Since 2016, construction volumes have grown at a 37% CAGR, and the average footprint of a new facility has swelled from 59,000 sq. ft. to 276,000 sq. ft.
Perhaps most concerning is the trend of expanding existing sites. Between 2026 and 2030, planned expansions at current locations are equivalent to 78% of the country’s existing data centre footprint. Performing heavy construction alongside sensitive, high-value operations significantly elevates the risk of physical damage and business interruption, particularly during the testing and commissioning phases. Howden advises that construction and operational risks must now be evaluated under a single, integrated insurance framework to prevent coverage gaps.
The Limitations of Redundancy
While over 90% of Indian facilities boast redundant UPS, generator, and cooling systems, operational outages remain a persistent threat. Many of these incidents involve system failures that cause no physical damage—meaning they often fall outside the scope of traditional property insurance. To address this, the market is beginning to pivot toward parametric insurance solutions, which provide coverage based on the occurrence of an event rather than the assessment of physical loss.
Furthermore, the interconnected nature of these facilities creates a massive systemic cyber exposure. Because a single breach can impact the workloads of countless tenant organisations, the risk of lateral movement is heightened. Cyber protection can no longer be treated as a siloed issue; it must be managed in tandem with property, power, and operational exposures.
Environmental and Operational Stress
Beyond technology, data centres are facing growing environmental pressures. With cooling a 1MW facility requiring roughly 25.5 million litres of water annually, many sites are operating in regions where water scarcity is already a critical issue.
Amit Agarwal, CEO of Howden India, emphasised that these multifaceted risks require a proactive management approach. “Power reliability, construction at operating sites, cyber concentration and water stress can all affect uptime,” Agarwal noted. “These risks need to be identified early and managed together, with insurance designed around the exposures that remain. This will help operators protect their assets and avoid gaps in cover as the sector expands.”
As the industry matures, the integration of sustainability metrics—such as Power Usage Effectiveness (PUE) and carbon footprint tracking—into the initial site planning phase will be essential to mitigating both financial and environmental risks.
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