KYND, a cyber risk intelligence provider that helps businesses and insurers understand and manage cyber exposure, has warned that insurers may be accumulating hidden AI-related risks across their portfolios as organisations introduce artificial intelligence tools without always disclosing their use.
In its latest white paper, The Wild West of AI Risk, KYND said the insurance industry’s immediate challenge is gaining a clearer understanding of where and how AI is being used, rather than focusing solely on future policy responses.
According to KYND, effective underwriting depends on visibility of clients’ technology usage, but the speed of AI adoption means some organisations may be integrating AI into their operations before discussing it with insurers. The company said this creates the possibility of unidentified exposure at the underwriting stage, which could gradually build across multiple policies and contribute to wider accumulation risk.
Aaron Aanenson, Head of Insurance, North America, at KYND, commented: “Many organisations are embedding AI into everyday business processes, but that isn’t always being reflected in underwriting conversations.
“Rather than focusing solely on where AI should sit within policy wordings, insurers should be prioritising visibility of AI adoption across their portfolios. AI-related claims are already emerging, so understanding those exposures before claims materialise will be critical to assessing and pricing risk effectively.
“Without that visibility, insurers risk hidden accumulation exposure, particularly where multiple policyholders rely on the same underlying AI platform or model. Identifying those concentrations early will be key to building more resilient portfolios.”
KYND said the widespread use of AI tools, including ChatGPT, highlights the scale of the challenge, with 77% of organisations now using the platform. The company warned that the insurance market could face a similar issue to “silent cyber,” where cyber risks accumulated within policies before insurers fully recognised their extent and impact.
The white paper also highlights that AI-related disputes are already emerging, including cases involving unreliable outputs, copyright concerns and allegations of bias. However, KYND said insurers continue to face uncertainty due to limited historical claims data, making it harder to assess the potential long-term impact of AI-related exposures.
A spokesperson from a specialist cyber MGA added: “I think the only thing the industry is keeping up on is excluding AI from areas it doesn’t want exposure to. In the US, you’ve seen a lot of general liability and ISO forms introducing AI exclusions – very similar to what they did when cyber became a thing, taking general liability off the table. Where we haven’t quite settled is in the E&O and cyber space: how it fits, what would actually be triggered.”
KYND said insurers will need greater insight into AI adoption across their portfolios to identify potential concentrations of exposure, improve risk assessment and develop more effective approaches to underwriting AI-related risks.
