Affirmative AI Liability Insurance

Armilla Insurance Services (Armilla), a Coverholder at Lloyd's, has announced the launch of its AI Liability Insurance policy. Underwritten by certain underwriters at Lloyd’s, including Chaucer, this policy provides affirmative coverage for AI-related risks.

As stated in the press release, businesses are racing to deploy AI, but their risk management and insurance tools haven't kept pace. There is growing concern around “silent AI cover”—the uncertainty over whether existing policies will respond to AI-specific failures, potentially repeating the early, costly lessons seen with cyber risk. This new product aims to address that gap by offering AI Liability Insurance with clear, affirmative coverage.

The policy is built from the ground up to address the specific ways AI can fail, giving businesses the confidence to innovate responsibly.

Traditional insurance policies often fall short when it comes to AI. Technology E&O (Errors and Omissions) policies may lack sufficient limits, place liability on the user, or exclude customized models. At the same time, many enterprises lack broad E&O coverage altogether, leaving their internally developed AI systems exposed to ambiguous policy language, potential disputes, and future exclusions.

Armilla’s AI Liability Insurance addresses key AI-related exposures by introducing a novel, broadly affirmative trigger related to the underperformance of AI applications—such as failures to perform as intended, critical errors, hallucinations, or inaccuracies that result in damages. The policy responds by covering legal costs and liabilities stemming from such AI failures.

Read full press release here.