Reinsurers Add AI-Specific Coverage Exclusions
Major reinsurers like Munich Re, Mosaic, and Lockton Re are issuing updates to their policies to specifically address AI-related risks, including new sublimits and exclusions. The move reflects the growing recognition of AI as a distinct risk category. This comes as a new report indicates 76% of insurers are now using AI for decisions based on behavioral data and incident history.
The shift goes beyond individual company policies, signaling an industry-wide move to end "silent coverage." The Insurance Services Office (ISO), whose forms underpin roughly 82% of U.S. Property & Casualty policies, has introduced optional generative AI exclusions for commercial general liability policies starting in 2026. This formal containment of AI risk stems from the technology's probabilistic nature, which challenges traditional insurance frameworks. Unlike deterministic software, AI can produce incorrect outputs or "hallucinations" without a direct system breach or wrongful act, meaning losses can fall outside of typical cyber and liability triggers. Insurers like AIG and W. R. Berkley have already filed for broad exclusions with some seeking to deny coverage for "any actual or alleged use, deployment, or development of Artificial Intelligence." This isn't just a tech E&O issue; the risk touches numerous lines, from AI-powered sprinklers failing (property) to AI-driven contract review errors (professional liability). In response, new affirmative insurance products are emerging to fill the coverage gap. Mosaic Insurance and Munich Re have partnered on "aiSure™," a policy offering up to $15 million in capacity to protect AI vendors from financial losses due to performance failures. The aiSure™ product uses a "parametric-like" structure, meaning claims are settled quickly based on measurable performance data, rather than requiring lengthy investigations into negligence. For example, it could cover a lender if an AI valuation model consistently overvalued properties, leading to bad loan decisions.
