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Artificial Intelligence Risk
We hear about artificial intelligence reshaping cybersecurity. We hear about hackers wielding AI tools. Now, broader AI concerns are entering the spotlight. A recent Hogan Lovells post emphasizes that existing cyber insurance may not be sufficient to cover AI-driven risks. “Existing cyber cover might encompass certain AI-related liabilities, but the cyber market is unlikely to be the answer on its own,” the firm warns. As businesses race to adopt AI, insurers and corporate boards must act to keep pace.
The Expanding AI Insurance Landscape
AI adoption is booming. One in six businesses already use artificial intelligence in some form. The global AI insurance market may exceed $141 billion by 2034.
But with opportunity comes risk. AI failures, biased outputs, reputational damage, and product malfunctions are growing concerns. Existing insurance programs may not fully address these exposures.
Appetite for Affirmative AI Cover Builds
Some AI-related liabilities may fall under traditional policies, including Professional Indemnity, D&O, Product Liability, and Cyber. This so-called “silent” cover is useful but untested.
Insurers are beginning to limit silent exposure. AI-specific exclusions may soon become common. This is driving demand for “affirmative” AI coverage — explicit protection for AI risks.
A market response is emerging. Armilla Insurance Services has launched an AI liability product underwritten by Lloyd’s. Yet off-the-shelf affirmative AI coverage remains rare.
AI and Cyber Risks: A Critical Intersection
The nexus between artificial intelligence and cyber risk heightens urgency. AI systems depend on data security and integrity. Breaches or tampering can cause significant harm.
Cyber insurance may cover some AI liabilities. Still, the Hogan Lovells post notes that the cyber market alone lacks the appetite and capacity to address all AI risks.
Businesses deploying AI at scale must prepare. Affirmative cover tailored to AI exposures will likely be required.
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How To Respond?
Boards and risk managers should act now:
- Identify current and future AI risks.
- Implement clear AI policies and staff training.
- Scrutinize existing coverage for AI-related gaps.
- Engage insurers on evolving affirmative AI solutions.
- Monitor developments in AI insurance products.
Growing Board Engagement on AI
A Deloitte survey shows rising board interest in AI risk oversight. Yet, 46% of respondents say they are unsatisfied with the current level of board-level AI engagement.
As AI becomes embedded in more operations, boards must prioritize insurance adequacy. Addressing AI risk is quickly becoming a cornerstone of effective governance.
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