Markets/Coverages: Chaucer Launches Standalone TPL Cover for AI Underperformance

Chaucer Group, the specialty re/insurer, announced the launch of a standalone third-party liability (TPL) insurance product in collaboration with Armilla AI, the Toronto-based managing general agent that provides specialized insurance and risk management solutions for artificial intelligence.

The TPL product was created to address the evolving risk of the mechanical underperformance of AI systems and models, and their associated liabilities.

The product is available to U.S. insureds with global territorial limits, with the binder led by Chaucer. It will cover hallucinations (false or misleading AI outputs), model drift (performance degradation over time), other mechanical failures or deviations from expected AI behaviour and legal defence and liability protection for claims arising from such underperformance.

An Armilla representative said the product is initially being offered in North America with plans to launch in the UK and the European Union.

This new TPL product builds on an earlier collaboration between both companies on a warranty style product which responded to increased market appetite for broader liability protection.

The relationship began when Armilla was selected to join a Lloyd’s Lab cohort focused on insurtech innovation, and Chaucer has actively supported Armilla’s growth since. This support included sponsorship of Armilla’s coverholder application at Lloyd’s.

“At Chaucer, we believe that AI is reshaping the risk landscape — and that requires fresh thinking from the insurance market,” commented Tom Graham, head of Partnership and Innovation, at Chaucer, a China Re subsidiary.

“Our partnership with Armilla AI has enabled us to co-develop a product that not only recognises the complexities of AI underperformance but provides meaningful coverage that supports innovation, transparency, and accountability. This launch marks a pivotal step in how we insure the technologies of tomorrow,” Graham said.

“Partnering with Chaucer marks a major milestone in our mission to make AI safer for everyone. Our new AI liability coverage empowers organizations to adopt cutting-edge technology; while knowing they’re protected against the unique risks AI can bring,” according to Karthik Ramakrishnan, CEO of Armilla AI.

“At Armilla, we’ve pioneered advanced methodologies to identify and mitigate AI-related vulnerabilities—from early development to deployment at scale,” Ramakrishnan added.

Source: Chaucer and Armilla AI

Topics InsurTech Data Driven Artificial Intelligence New Markets