Cyber insurance has quickly evolved from a “nice-to-have” to a business necessity. With cyberattacks on the rise and ransomware costs ballooning, most insurers no longer offer blanket coverage without requiring businesses to prove that their IT infrastructure is secure and resilient. Meeting these requirements can be challenging for small businesses, especially when hosting critical systems on-premises with limited resources.
That’s where colocation comes in. By moving IT infrastructure to a professional data center environment, small businesses gain immediate access to a range of built-in security, compliance, and resilience measures that help satisfy cyber insurance standards—and do so in a cost-effective and scalable way.
In this article, we’ll explain what insurers are looking for and show how colocation helps small businesses check the right boxes.
Why Cyber Insurance Matters More Than Ever
Cyber insurance provides financial protection and support in the event of data breaches, ransomware attacks, and other cyber incidents. This coverage can mean the difference between recovering quickly or facing devastating losses for small businesses. According to a report by IBM, the average cost of a data breach in 2023 was $4.45 million, with small businesses increasingly targeted by attackers.
However, cyber insurers have become more selective in their underwriting process. Policies often require businesses to demonstrate that they have robust technical safeguards. Lacking those safeguards can result in higher premiums—or outright denial of coverage.
Common Cyber Insurance Requirements
While specific requirements vary by provider and policy type, most cyber insurers now require proof of:
- Physical security for servers and infrastructure
- Redundant power and connectivity
- Fire detection and suppression systems
- Data encryption and access controls
- Regular backups and disaster recovery plans
- 24/7 monitoring and intrusion detection
- Compliance with industry standards (e.g., HIPAA, PCI-DSS, SOC 2)
Implementing all of this in an office IT closet or small server room is not only difficult—it’s prohibitively expensive. That’s why many small businesses are turning to colocation.
What Is Colocation?
Colocation is a service that allows businesses to place their physical servers and networking equipment in a professional data center facility. Rather than building and maintaining their own server rooms, businesses rent space in a secure, climate-controlled, and fully managed environment.
Clients benefit from enterprise-grade infrastructure at a colocation facility like Datacate’s data center without investing in building it themselves:
- Redundant power and cooling systems
- Multiple high-speed internet providers
- Physical and digital security measures
- Around-the-clock technical support and monitoring
How Colocation Supports Cyber Insurance Requirements
Let’s look at how colocated infrastructure aligns with the most common insurer requirements.
1. Physical Security
Insurers expect that physical access to servers is strictly controlled. Colocation data centers are built with physical security in mind, including:
- Biometric access controls
- Video surveillance and 24/7 monitoring
- Secure, locked cabinets or cages
- On-site personnel for access validation
With these controls in place, small businesses can demonstrate that their infrastructure is protected against unauthorized physical access.
2. Power and Connectivity Redundancy
Power outages and internet disruptions can cripple a business—and expose it to cyber risks if backup systems fail. Datacate’s colocation facilities offer:
- Multiple power feeds, UPS, and backup generators
- Carrier-neutral connectivity with multiple ISPs
- Automatic failover systems
These capabilities ensure high availability and business continuity, key components that insurers look for when evaluating a business’s cyber resilience.
3. Environmental Safeguards
A fire in a server closet can lead to catastrophic data loss. Colocation data centers implement:
- Fire detection and suppression systems
- Temperature and humidity monitoring
- Leak detection and facility-wide alerting
These features mitigate the risks of environmental threats and support the physical protection of digital assets—another insurer checkbox.
4. Access Control and Monitoring
Cyber insurance often requires detailed logging of who accessed systems and when. Colocation enables:
- Segregated cabinet access via locked enclosures
- Entry logs maintained by on-site personnel
- Integration with remote monitoring and management tools
These logs provide a clear audit trail and align with standards like SOC 2, which insurers view favorably.
5. Backup and Disaster Recovery Readiness
Even with the best prevention, incidents can occur—so insurers require that businesses have a backup and disaster recovery (DR) strategy. Datacate supports this through:
- On-site and off-site backup options
- Rapid recovery environments
- Support for hybrid cloud backup solutions
When coupled with colocation, these services create a highly resilient environment that insurers prefer to underwrite.
6. Security and Compliance Standards
Cyber insurers often require that businesses meet regulatory standards such as:
- HIPAA (for healthcare-related data)
- PCI-DSS (for payment card data)
- SOC 2 (for service organizations)
Datacate’s data centers are built to support compliance with these standards. For example, businesses colocating with Datacate can achieve compliance faster by leveraging our:
- Secure access protocols
- Intrusion detection/prevention systems (IDS/IPS)
- Centralized logging and SIEM integration
- Hardened infrastructure with dedicated resources
This makes demonstrating compliance simpler and more cost-effective, which is key for securing cyber coverage.
Beyond Insurance: Other Benefits of Colocation
While cyber insurance is the focus, colocation offers broader operational and financial benefits that strengthen a small business’s IT posture:
- Cost savings: Avoid the capital expense of building and maintaining your own data center.
- Scalability: Add or remove equipment as your needs change.
- Performance: Faster connectivity and lower latency than many cloud environments.
- Expert support: Access to trained professionals who can assist with system monitoring, hardware support, and more.
These benefits create a more stable, efficient, and secure IT environment—further reducing the likelihood of needing to make an insurance claim in the first place.
Why Partner with Datacate?
At Datacate, we understand the unique needs of small and medium-sized businesses. Our colocation services help you meet today’s cybersecurity expectations—whether from insurers, auditors, or your customers.
Here’s what sets us apart:
- Regional presence: Conveniently located facilities for businesses across Northern California and beyond
- Hybrid-friendly: Support for integrating colocation with cloud or on-prem infrastructure
- Compliance-ready: Infrastructure and services built to support your regulatory needs
- Personalized service: No one-size-fits-all—we tailor solutions to your business
Whether you’re applying for cyber insurance for the first time or facing rising premiums due to increased risk, moving your infrastructure to Datacate’s secure colocation environment is a smart step.
Final Thoughts
Cyber insurance isn’t just another business expense—it’s a critical safety net. But to qualify, small businesses must show that they’ve invested in proper infrastructure security and compliance. Colocation provides a cost-effective, practical, and scalable way to meet those demands.
By moving your servers and systems to a professionally managed data center like Datacate’s, you’re satisfying insurer requirements and protecting your operations, reputation, and bottom line.
Let Datacate help you meet your cyber insurance goals while optimizing your IT infrastructure. Contact us today to learn more about our colocation services and get a customized plan tailored to your needs.
