Recent headlines about the X platform going down due to a data center fire caught public attention. For professionals in the data center ecosystem, this incident was just the latest reminder of a bigger issue: downtime risk is escalating, and too often it is financially unprotected.

While this fire lasted roughly a day, the impact of such incidents can be much longer. In 2023, a fire at a GCP data center in Paris led to a multi-cluster failure that required nearly three weeks for full restoration, causing major business disruption. A year earlier, a fire in Strasbourg destroyed an OVH data center, taking 3.6 million websites offline.

These events illustrate a growing reality: downtime is not just an operational risk, it is a significant financial exposure. Lost revenue, SLA penalties, reputational damage, and even litigation are increasingly common, yet often fall outside the scope of traditional insurance.

Even though data center fires are a high-profile cause of events which may be severe, they are relatively rare. Parametrix constantly monitors and regularly tabulates the root cause of cloud outage events at the three major providers, Amazon Web Services (AWS), Microsoft Azure, and Google Cloud Platform (GCP).

Fire is just one of the root causes to fall under the “physical infrastructure” category. A 2024 Parametrix analysis showed that this category, which also includes flood and power faults, only contributed to 5% of critical cloud outages in 2024. Human error Human error continued to be the leading cause of outages, accounting for 68 percent.

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Yet despite these trends, many companies remain financially exposed. Business interruption (BI) insurance typically requires physical damage to trigger payouts, leaving most cloud and service outages uninsured.

As a result, operators, tenants, and investors are turning to parametric insurance. It triggers payouts automatically based on measured downtime events, without the need for physical loss or complex claims processes.

In a world where digital infrastructure is more critical and interconnected than ever, resilience is no longer optional. Forward-thinking stakeholders are embedding insurance-backed risk management into their operations and deals- not just to protect against loss, but to gain a competitive edge.

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Originally published on Insurance Edge