Amazon faces $150 million loss from data centers strikes as insurance won’t cover losses

Last month, drone strikes reportedly linked to Iran damaged Amazon Web Services (AWS) data centers in Bahrain and the United Arab Emirates, disrupting cloud services for weeks. The outages forced Amazon to issue customer credits that reportedly cost the company about $150 million, as per news source.    

But the financial impact went beyond service downtime. The incident highlighted a deeper vulnerability: insurance coverage gaps.

“Typically, a policy excludes war. So if it’s an active war, it’s not gonna be covered,” Tom Harper, a data center insurance specialist at Gallagher, told the news source.

These AWS facilities were not random targets. As geopolitical tensions rise, data centers are increasingly viewed as strategic infrastructure. They support critical systems such as communications, logistics, financial transactions, and even military operations.

When such infrastructure gets disrupted, the consequences follow.  

·         Service outages for businesses and consumers

·         Interruptions to payment systems and financial platforms

·         Increased costs that may ultimately be passed on to customers

AWS itself reported continued disruptions in the region for more than a month after the attacks, underscoring the prolonged recovery timelines involved.

War exclusions are standard across many insurance policies, not just for data centers but across industries. This means that in the event of damage linked to geopolitical conflict, companies often have to absorb the losses themselves.

For tech giants this kind of damage means hundreds of millions of dollars whereas for smaller businesses that are dependent on cloud infrastructure, it may result in lost revenue, limited compensation, and rising insurance premiums.

Data centers are already capital-intensive. According to JLL, construction costs alone average about $12 million per megawatt, excluding equipment.

Now, security costs to be added. Experts say advanced security measures can add up to 5% to construction costs, while physical protections like fencing, gatehouses and vehicle barriers alone can range from $5 million to $20 million per site.

As threats grow, so does spending. Industry experts report surging demand for enhanced security. These additional costs rarely stay confined to corporate balance sheets, they often translate into higher cloud pricing, increased subscription fees, and rising operational costs for businesses, which can eventually impact consumers.