PLUS Panel: AI Adoption Raises Governance and Litigation Risks for Companies
A surge in artificial intelligence adoption is creating new governance, cybersecurity, and litigation risks for companies, as discussed during a recent panel at the Professional Liability Underwriting Society D&O Symposium in New York.
Focus on Governance and Oversight
Panelists emphasized that boards and insurers are increasingly scrutinizing how companies are deploying AI tools and whether adequate oversight and governance frameworks are in place. Andrew Kosoff, a senior vice president and public company executive liability leader at Hub International, stated, “AI is not going to be a trend. It’s going to be part of all of our business.”
As companies integrate AI into their operations and products, underwriters and brokers are asking more questions regarding the use of this technology and the safeguards surrounding data and oversight.
Litigation Risks Arising from AI
Panelists warned that litigation could arise if companies overstate the capabilities of AI technologies or fail to manage associated risks properly. Elizabeth Napoli, vice president of corporate insurance at Trisura Insurance Company, noted, “AI is really the disclosure issue in a lot of those claims. Did they overstate what the technology could do?”
This disclosure risk has recently surfaced in securities litigation, with lawsuits alleging that companies misled investors about the capabilities of AI or the potential financial benefits of its adoption.
Cybersecurity Threats and AI
Beyond disclosure risks, panelists highlighted the potential for AI to increase cyber threats by lowering the barrier for attackers. Threat actors are increasingly using AI tools to automate or enhance cyberattacks, making them more efficient and easier to deploy. Peter Smith, head of cyber at Axis Capital, remarked, “The threat actor is trying to do the thing that requires the least amount of effort and returns the largest amount of gain.”
Simultaneously, cybersecurity vendors and insurers are exploring ways to utilize AI defensively to detect threats and fortify security systems.
Legal Risks in AI Deployment
Panelists pointed to growing legal risks related to intellectual property, privacy, and data governance as companies deploy AI tools that rely on large datasets. These risks are likely to escalate as regulators develop clearer frameworks for AI oversight.
Emily Selck, Baldwin Group’s senior director and national practice leader of cyber, stated, “There is not enough regulation around AI. As regulation develops, companies will have to address what that means from a governance standpoint.”
Conclusion: New Exposures for Insurers
The rapid evolution of AI is expected to create new exposures for both cyber and D&O liability insurers, particularly if companies fail to disclose or properly manage the risks associated with this technology. As AI becomes more entrenched in business operations, the need for robust governance and risk management practices will only become more critical.
