Cyber risk intelligence provider KYND has issued a warning that insurers could be unknowingly accumulating "silent AI" exposure across their portfolios. Businesses are currently adopting artificial intelligence technologies at a pace that far exceeds their disclosures to underwriters. This lack of visibility means that AI-related risks are often excluded from assessment during the initial underwriting process. In its latest white paper, "The The Wild West of AI," KYND argues that while the insurance market continues to debate appropriate coverage models, the immediate challenge is the absence of clear transparency.[1]
Exposure can quietly build across a portfolio, leading to significant accumulation risk that insurers may not fully understand until a widespread incident occurs. The fundamental issue lies in the fact that insurance relies on client disclosure. Many organizations are embedding artificial intelligence into everyday business processes but are not declaring these changes during underwriting conversations.
In expert comment, Aaron Aanenson, Head of Insurance for North America at KYND, noted that understanding these exposures before claims materialize is critical for effective risk pricing. "Rather than focusing solely on where AI should sit within policy wordings, insurers should be prioritizing visibility of AI adoption across their portfolios," Aanenson stated. He warned that without such visibility, insurers risk hidden accumulation exposure, especially when multiple policyholders depend on the same underlying AI platform or model.
The industry currently risks repeating the experience of "silent cyber," where exposures accumulated within traditional policies long before insurers understood how to price them. With 77% of organizations now using tools like ChatGPT, the potential for widespread, correlated claims is significant.
Disputes regarding inaccurate outputs, copyright infringement, and algorithmic bias are already emerging. However, the lack of historical claims data makes it difficult for insurers to assess how AI exposure could evolve. This uncertainty is particularly concerning Errors and Omissions (E&O) and cyber insurance providers, who have yet to settle on how AI triggers should be integrated into existing frameworks.
A spokesperson from a specialist, Managing General Agent (MGA), observed that the industry's primary response so far has been to exclude AI from areas where it does not want exposure. In the United States, several general liability forms have introduced AI exclusions, mirroring the steps taken when cyber insurance first emerged as a distinct category.
Despite these exclusions, the challenge remains for insurers to identify where AI adoption is creating new dependencies within their client base. Aanenson emphasized that identifying these concentrations early will be the key to building more resilient portfolios that can withstand the unique challenges of the AI era.
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[1] https://www.cybersecurityintelligence.com/blog/insurers-at-risk-over-silent-artificial-intelligence-exposure-9563.html
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