In today’s digital era, the entire modern banking system relies on data centers as the backbone of its operations. Everything from debit card transactions and mobile banking to clearing systems and national payment systems relies on the reliability of data center infrastructure, operating 24/7. However, behind these technological advancements lies a significant and often overlooked threat: the risk of data center maintenance failure. A single downtime in a key system can have a ripple effect throughout the national financial network, resulting in billions of rupiah in financial losses within hours.
Cases like this aren’t just theoretical. In 2024, Indonesia was rocked by a ransomware attack that crippled a government data center, rendering various public services inoperable for several days (source: Data Center Dynamics). This incident served as a sobering reminder that data center management and maintenance should not be taken lightly. For the banking sector, the impact could be far more devastating. Even the slightest disruption could halt financial transactions nationwide, harm customers, and damage reputations built over decades.
Therefore, risk management and insurance protection must go hand in hand to maintain financial stability. Before downtime disrupts all your financial services, ensure your protection systems are optimal. In the modern financial world, every second of delay can mean significant losses. Contact L&G Insurance Broker now on 08118507773 for free consultation before any risk occurs.
Case of Failed Maintenance that Halted Bank Operations
Global Incident and Consequences of Downtime
Several global incidents have demonstrated how even minor data center maintenance failures can lead to catastrophic losses. One example is DBS Bank and Citibank in Singapore, which experienced a major disruption in 2024 due to an IT system misconfiguration. Within eight hours, more than 2.5 million digital transactions failed to be processed (source: Channel News Asia).
Imagine the impact if this happened in Indonesia, where millions of financial transactions take place every minute. Customers could lose access to their accounts, ATM systems would crash, and even interbank transactions would be blocked. For banks, the immediate losses would not only be operational costs but also loss of public trust and potential lawsuits from aggrieved customers.
Human Error as the Main Trigger
Errors like these often occur not because of cyberattacks, but rather because of human error during data center maintenance. A small error in a software update, server configuration, or cooling system can trigger a complete system outage. The risk of this failure is even greater if the bank is using aging or outdated infrastructure. In such circumstances, companies need to have a proven backup system and disaster recovery plan. However, if all preventative measures fail, the only remaining layer of protection is public and professional risk insurance, which can cover financial losses and legal liability resulting from the disruption.
Financial Impact on the Financial Sector and Reputation
The losses resulting from data center maintenance failures cannot be underestimated. According to a study by the Ponemon Institute, the average downtime cost for a large data center reaches USD 8,851 per minute, or approximately IDR 140 million per minute. If a banking system were to be down for eight hours (as in the case in Singapore), the total direct losses could exceed IDR 67 billion. This figure does not include the costs of data recovery, forensic investigation, and customer compensation.
The financial impacts faced by banks include:
- Regulatory Penalty: Fines from financial authorities (OJK or Bank Indonesia) for massive service disruptions and system compliance violations.
- Loss of Investor Confidence: Banks’ credit ratings and stock values can drop drastically due to news of downtime.
- Lawsuits: Lawsuits from customers and business partners (merchants) due to financial losses suffered due to system inaccessibility.
The Importance of Public Liability
The case of Bank Mandiri several years ago, which experienced a digital system disruption, demonstrated that the social and reputational impacts can be felt for days. In this context, public liability insurance is crucial for protecting financial institutions from third-party claims resulting from operational disruptions. This insurance covers compensation costs, lawsuits, and losses resulting from technical negligence.
Additional Risks from Third Parties and Vendors
Many large banks don’t manage their data centers directly, instead outsourcing them to third-party vendors. While this outsourcing is efficient, it also creates new contractual risks. If the vendor fails to maintain them properly, the consequences can be dire.
A report from Tempo.co regarding the alleged misuse of government data center maintenance funds following the 2024 ransomware attack emphasized that weak vendor oversight can exacerbate the impact of system disruptions, leading to a crisis of public trust. In the banking industry, when IT vendors fail to maintain systems as contracted, banks can lose billions of rupiah, but it’s difficult to claim compensation if liability clauses are unclear. This is where insurance brokers play a crucial role in bridging this legal gap by arranging Professional Indemnity coverage for vendors and Public Liability coverage for banks as service providers. With the assistance of a broker, every risk from the contractual relationship can be mapped and appropriately transferred to the insurance provider.
Strategic Protection Solutions: Insurance Recommendations for Data Centers
Addressing the complexities of data center risk, insurance brokers play a vital role as strategic advisors. They don’t just sell policies; they help companies understand the risks they face and tailor coverage to their business profile. L&G Insurance Broker, a leading broker in IT, infrastructure, and banking insurance, specializes in conducting comprehensive risk assessments of data center systems.
Insurance Recommendations for Banking Data Centers
The following are strategic insurance recommendations that must be owned by the banking sector and data center maintenance vendors, which are facilitated by insurance brokers:
a. Public Liability Insurance
Protects the bank from third-party (customer) claims resulting from financial losses caused by data center operational disruptions. This covers legal costs and compensation sought by external parties due to the interruption of banking services.
b. Professional Indemnity (PI) Insurance
A mandatory policy for data center maintenance vendors. This policy protects the vendor from lawsuits resulting from professional negligence (Errors and Omissions), technical errors, or failure to meet SLAs that result in financial loss to the client.
c. Property All Risks (PAR) dan Business Interruption (BI)
PAR protects data center physical assets (servers, coolers, UPS) from physical damage (fire, flood). BI covers revenue losses suffered by the bank due to downtime triggered by physical damage covered by PAR. BI is the financial key to a bank’s rapid recovery.
d. Cyber Risk Insurance
Protects against the risk of cyberattacks (ransomware, hacking) that result in data leaks and system disruptions. Cyber insurance also covers the costs of client notification and reputation restoration.
Implementation of Risk Management in the Data Center Maintenance Cycle
Risk management must be integrated into every data center maintenance cycle:
- Planning Phase: Insurance brokers help review vendor contracts and liability clauses. Banks ensure vendors have adequate PI policies.
- Maintenance Phase: Vendors implement strict SOPs and maintenance protocols (zero downtime). A 24/7 monitoring system is required to prevent the risk of human error.
- Post-Incident Phase (Disaster Recovery): The broker leads the insurance claims process for direct losses (PAR) and indirect losses (BI, PI, PL), ensuring rapid financial recovery.
Risk audits conducted by brokers help banks and vendors identify protection gaps, such as underinsurance on vital assets or ambiguous contractual clauses. L&G Insurance Broker ensures that banks’ protections are appropriate for the highly operational risks inherent in the banking sector, particularly those related to clearing systems and real-time transactions.
Strategic Recommendations for Data Center Owners and Vendors
To make data center maintenance activities safer and more efficient, here are some recommended strategic steps:
- Detailed Risk Plan: Create a detailed risk plan that covers all types of maintenance, from preventive to emergency, with a clear financial impact matrix.
- Periodic System Audits: Conduct periodic system audits at least twice a year to detect potential disruptions to the infrastructure and cooling system.
- Liability Clause: Involve your insurance broker early in your maintenance contract planning to ensure that the liability clause is clearly written, including reasonable liability limits.
- Mandatory Public Liability: Ensure that each vendor has public liability and professional indemnity protection that is commensurate with the financial risk the bank may incur.
- Emergency Communication System: Establish an emergency communication system between vendors, clients, and brokers to expedite incident and claim response, minimizing downtime.
- Implement Security Patching: Implement strict security patching and software update protocols as part of maintenance, reducing the cyber risks that often accompany system disruptions.
With this strategy, risks can be minimized, and any potential losses can be anticipated more thoroughly.
The Role of Insurance Brokers in Banking Financial Resilience
L&G Insurance Broker acts as a risk guardian for the banking sector. L&G helps companies in South Tangerang and across Indonesia navigate the complexities of data center financial and operational risks. L&G Insurance Broker’s advantages:
- Regulatory Specialization: Understanding IT risks, fintech systems, and OJK and Bank Indonesia regulatory compliance related to system security.
- Fast Claims: L&G assists in the claims process (PAR, BI, PI, PL) to ensure prompt disbursement of compensation funds, restoring the bank’s cash flow after downtime.
- Negotiating Wording: The broker ensures that the insurance policy wording is comprehensive and does not contain any detrimental exclusion clauses.
Conclusion
Data center maintenance isn’t just a technical task, but a significant responsibility for data and client trust. Without robust risk management, a single small error can lead to billions of rupiah in financial losses, reputational damage, and even bankruptcy in the banking sector.
Therefore, every data center maintenance vendor and banking institution must have a risk protection system and support from a professional insurance broker. L&G Insurance Broker is ready to help you analyze risks, prepare the best coverage (Public Liability, Professional Indemnity, and PAR/BI), and accompany you through the claims process.
Effective risk management is an investment that protects your business’s cash flow and reputation. Before risks occur and losses escalate, Contact L&G Insurance Broker now in 08118507773 for free consultation before any risk occurs.
Source:
- https://www.channelnewsasia.com/singapore/dbs-citibank-digital-banking-outage-it-issue-3900031
- https://en.tempo.co/read/1885969/indonesias-data-center-ransomware-attack-dpr-member-suspects-maintenance-fund-misappropriation
- https://www.datacenterdynamics.com/en/news/ransomware-incident-shuts-down-indonesian-govt-data-center
