As businesses embed generative AI into products, services and internal operations, demand is growing for insurance against risks such as defective outputs, copyright infringement and cyber breaches, according to a Geneva Association report. 

But difficulty verifying GenAI risks and the potential for large losses raise insurability concerns, echoing the early challenges of cyber insurance.  

A survey by the industry think tank found more than 90% of businesses are interested in insurance for GenAI risks, and two-thirds would pay at least 10% higher premiums for it.

About 71% of surveyed businesses have implemented GenAI in at least one function.

“The task for insurers now is to define clear risk boundaries and pilot modular coverage models that can adapt to this evolving technology,” Geneva Association director of digital technologies Ruo Jia said.

“GenAI’s distinct risk profile demands new risk transfer models, enhanced governance standards and clearer regulatory guidelines to improve its insurability.”

Insurers are experimenting with policy extensions and standalone AI products, but “modular approaches and cross-sector partnerships” will be critical.

Traditional AI risks tend to have clearer claims triggers and established precedents for liability and loss assessment, as risks from narrow tasks such as data analysis or classification are more predictable, quantifiable and legally manageable.  

In contrast, GenAI introduces complexities that “significantly weaken” its insurability. Generating unstructured outputs such as text, images or audio increases the likelihood of producing harmful, biased or infringing content.  

This complicates risk assessment while raising the maximum potential loss.  

The risk of reputational harm and unintended discrimination makes “insurability less viable under existing frameworks”, the report says. “The underwriting costs for GenAI-related risks are higher due to information asymmetry, lack of historical loss data and legal uncertainty. These factors limit the availability and affordability of insurance products.”

GenAI creates new categories of exposure that extend beyond traditional insurance boundaries, the report adds.  

Association MD Jad Ariss says few technologies have spread as rapidly as GenAI, yet its risks are complex and poorly understood. The report’s findings “underline the urgency for insurers, regulators and technology providers to work together in developing frameworks that can safeguard businesses while enabling innovation to flourish”, he says.