Major Insurers Shun AI Coverage Over Systemic Risk

Leading insurers such as AIG, Great American and WR Berkley are moving to exclude AI-related liabilities from corporate policies amid fears that artificial intelligence poses unmanageable “black box” risks. Underwriters cite the unpredictability of AI models and the potential for catastrophic systemic loss—where a single model error could trigger thousands of simultaneous claims. Historical incidents underscore these concerns: Google faced a $110 million lawsuit after its AI wrongly accused a firm of legal issues; Air Canada had to honour chatbot-generated discounts; and criminals exploited AI voice cloning to steal $25 million from Arup. As a result, businesses relying on AI must now consider self-insurance, bolster internal risk controls or scale back AI deployments until insurers adapt. This shift marks a turning point in AI risk management and corporate liability insurance, forcing companies to shoulder full accountability for AI failures.