Insurers see huge growth potential, but these sectors bring serious risk complexities as well. Underwriters can no longer rely solely on standard construction, occupancy, fire protection and natural disaster exposure. They must look much closer at operational dependencies, asset concentrations and potential business interruption losses.
Amit Agarwal, CEO, Howden India
The property insurance market is changing rapidly. A new generation of infrastructure assets are taking centre stage. Data centres, warehouses and logistics parks are no longer viewed simply as bricks and mortar real estate. They form the crux of digital services, e-commerce, modern manufacturing, healthcare and global supply chains.
In India, these assets have emerged as major economic pillars. Backed by cloud computing, artificial intelligence, data localisation and digital growth, India’s data-centre capacity has jumped more than fourfold, rising from roughly 375 MW in 2020 to 1,575 MW today, with forecasts pushing past 4 GW by 2030. The warehousing sector has expanded to over 549 million square feet across eight major markets, and well over 610 million square feet nationwide, pushed forward by e-commerce, third-party logistics and manufacturing.
Insurers see huge growth potential, but these sectors bring serious risk complexities as well. Underwriters can no longer rely solely on standard construction, occupancy, fire protection and natural disaster exposure. They must look much closer at operational dependencies, asset concentrations and potential business interruption losses.
A Different Type of Risk
Modern data centres are among the most complex commercial facilities ever built. Powering artificial intelligence and cloud storage means housing high-value equipment such as massive server arrays, intricate electrical systems, heavy cooling infrastructure, generators and sprawling telecommunications networks. As these facilities run 24/7, even a momentary glitch in power, cooling or connectivity can ripple across multiple touchpoints at once.
Warehouses and logistics parks have transformed just as much over the past decade. Nowadays facilities routinely feature robotics, automated storage systems, temperature-controlled zones and lithium-ion battery installations, serving as vital links for retailers, pharmaceutical companies and manufacturers.
A major new hurdle is the convergence of cyber and physical risks. Because modern logistics hubs and data centres rely heavily on automated software, networked controls and operational technology, a cyber incident is no longer just an IT headache. It translates directly into physical failure, from cooling-system crashes and power outages to robotics malfunctions and sudden shutdowns. Insurers now need to assess the digital resilience of these facilities just as rigorously as their physical walls.
The Challenge of Concentration Risk
One defining feature of these assets is high concentration and deep interdependence. A logistics park might house several distinct buildings, yet they often share a single power grid, fire-water system, security infrastructure and access road. Data-centre campuses operate similarly, with multiple buildings drawing from common substations, cooling plants and backup generators.
Because of this shared foundation, a single incident such as a fire, a flood, a utility failure or a system breakdown, can trigger losses far surpassing those of a standalone property.
The challenge goes past the property line. Many facilities in a region rely on the exact same municipal power grid, water source or transport corridor. Underwriters must look beyond the fence line and evaluate the resilience of the broader surrounding ecosystem.
Traditional Perils, Wider Impacts
Classic perils like floods, earthquakes, windstorms and wildfires remain top priority, as their potential fallout is growing more severe. Climate volatility adds even more uncertainty with extreme weather events growing more frequent and erratic.
For data centres, reliance on external infrastructure is a major vulnerability. Uninterrupted electricity and cooling are non-negotiable, and in many regions, water availability is critical for cooling towers. A facility might escape physical storm damage yet still face extended downtime if local power or water lines cannot be quickly restored.
Warehouses face a different set of vulnerabilities. The widespread adoption of lithium-ion batteries, high-density racking and automation can make fires significantly harder to contain. Once a blaze breaks out, dense storage and combustible packaging can rapidly escalate the scale of the loss.
Business Interruption as the Primary Exposure
Repairing a damaged physical structure is often the easiest part of a claim. Getting operations back online is where the real challenge lies. Critical components like custom transformers, heavy switchgear, cooling units and automation technology frequently suffer from long replacement lead times, compounded by complex installation and testing phases.
This hits data centres hard, where strict uptime commitments leave zero room for error. The failure of a single component can halt operations completely, even if the building itself sustained minimal physical damage.
Business interruption coverage demands meticulous structuring. Extensions like service interruption, contingent business interruption, denial of access, waiting periods and indemnity periods are more crucial than ever.
The same applies to logistics facilities. A disruption can force emergency inventory relocations, alternative transport arrangements and costly workarounds. Lost revenue, contractual penalties and extra operating expenses can easily dwarf the cost of physical damage itself.
A More Technical Underwriting Approach
Navigating these exposures calls for a sophisticated approach to risk analysis. Key areas of focus include infrastructure dependencies, fire protection standards, construction quality, recovery timelines and catastrophe exposures.
Advanced technology, such as predictive maintenance tools, IoT sensors and real-time operational data, offers unprecedented visibility into facility performance. Good site selection, quality construction, robust compartmentation and disciplined maintenance remain the bedrock of sound risk management.
Closing the Protection Gap
Managing these risks often requires blending traditional insurance and reinsurance with layered programmes, captive structures and parametric solutions. Parametric insurance works well when operational downtime stems from measurable triggers like power outages, extreme heatwaves, flood thresholds or seismic events.
Since payouts rely on objective data rather than lengthy loss-adjustment processes, they deliver rapid liquidity, bridging critical gaps in business interruption and infrastructure dependency coverage.
A hyperscale data centre running heavy AI workloads demands a vastly different evaluation than a standard data-storage facility, just as a highly automated fulfilment hub carries distinct exposures compared to a traditional warehouse.
The opportunity for growth is immense, but long-term success relies on technical precision, risk differentiation, and a firm grasp of modern operational realities.