Armilla Insurance Services, a specialist managing general agent and Lloyd’s Coverholder focused on emerging technologies, has launched a new AI Liability Insurance policy designed specifically to address the growing legal and operational risks tied to artificial intelligence.
Underwritten by select underwriters at Lloyd’s, including Chaucer, the policy delivers explicit, affirmative coverage for AI-related exposures that traditional insurance often fails to address.
As AI systems become deeply embedded in core business functions, the legal fallout is mounting.
Researchers at George Washington University have tracked over 150 AI-related lawsuits in the US over the past five years—a figure expected to rise as regulation tightens and oversight increases.
For companies deploying AI tools, whether off-the-shelf or custom-built, the need for reliable risk protection is no longer theoretical.
Yet standard insurance frameworks are poorly equipped for the realities of AI. Traditional Technology Errors & Omissions policies typically exclude or underinsure AI-related failures, especially when models are adapted or trained in-house. Many businesses lack comprehensive E&O coverage altogether, leaving internally developed AI systems vulnerable to policy loopholes, future exclusions, and costly disputes.
Armilla’s newly developed policy addresses these shortfalls directly. It introduces a broad, affirmative trigger that responds to core AI performance risks—such as malfunctions, hallucinations, critical inaccuracies, or breakdowns in expected function.
The policy is structured to cover legal fees and third-party liabilities when AI systems fail, helping clients manage fallout from operational disruptions or reputational harm.
By combining technical insight with insurance innovation, Armilla aims to close the coverage gap facing modern AI adopters.
“Businesses are racing to deploy AI, but their risk management and insurance tools haven’t kept pace. There’s a growing concern of ‘silent AI cover’ – the uncertainty of whether existing policies will respond to AI-specific failures, potentially mirroring the early, costly lessons of cyber risk,” added Karthik Ramakrishnan, CEO of Armilla.
“Our AI Liability Insurance provides clear, affirmative coverage. It’s built from the ground up to address the specific ways AI can fail, giving businesses the confidence to innovate responsibly.”
“The proliferation of AI technology creates novel challenges that demand innovative insurance solutions,” said Nasra Ahmed, Senior Innovation Manager at Chaucer.
“Existing frameworks often leave businesses exposed. We are proud to partner with Armilla, leveraging their distinct technical insight to provide the market with a product that offers much-needed clarity and certainty for companies navigating the complexities of AI adoption.”
