Cloud outage insurance: Everything you need to know

Companies collectively spent $61 billion on cloud infrastructure in Q4 2022, and there’s more growth to come. Yet, businesses are poorly protected from losses caused by cloud downtime.

“Cloud service providers typically offer service level agreements (SLAs) that outline their commitments to service availability and performance,” AV8 general partner Amir Kabir told TechCrunch+. But while penalties are usually involved should agreed-on service levels not be achieved, these rarely cover full losses that a cloud outage could cause its customers.

Case in point: After millions of websites went offline after a major data center fire in France, a small online seller complained in the press that her cloud provider, OVHcloud, was only offering her a voucher worth a few months of free hosting — around $30, when she estimated the actual damage as closer to $2,000.

For e-commerce businesses large and small, it is easy to see how cloud downtime can result in a loss of revenue. But cloud outages can have a negative revenue impact on businesses of all kinds, whether it is because of productivity loss, or because they have their own SLAs with customers to whom they may owe compensation.

The usual corollary of risk is insurance against it, but when it comes to cloud downtime, the insurance sector hasn’t fully caught up yet.