Why insurance companies should encourage solid AI risk management instead of excluding it
Insurance market responses to AI risk shape the financial incentives for AI governance — a dynamic relevant to Commonwealth procurement and vendor risk frameworks.
Key points
- Major US insurers including AIG are seeking to exclude AI-related risks from coverage, per OECD AI analysis.
- OECD argues insurers should instead incentivise sound AI risk management rather than exclude AI liabilities.
- Only a truncated extract is available; full argument and any policy recommendations are behind the link.
Implications for Australian agencies
- Monitor Risk and procurement teams may want to monitor how AI exclusion clauses in insurance markets develop, as they could affect vendor liability and Commonwealth contract risk allocation.
- Consider Agencies developing AI risk frameworks could consider whether their vendor due diligence processes account for gaps in AI insurance coverage.
Implications are AI-generated. Starting points, not advice — see methodology for how they're framed.
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Weekly digest, 15 December 2025
"Why insurance companies should encourage solid AI risk management instead of excluding it"
Source: OECD AI Wonk Blog
Published: 17 December 2025
URL: https://wp.oecd.ai/why-insurance-companies-should-encourage-solid-ai-risk-management-instead-of-excluding-it/
An OECD AI Wonk Blog post examines the emerging trend of major insurance providers seeking regulatory permission to exclude AI-related risks from coverage, citing companies such as AIG, Great American, and WR Berkley. The OECD's position is that insurers should instead use their market influence to encourage robust AI risk management practices. Only an excerpt is available in this item; the full argument and supporting evidence require direct engagement with the source. The piece is relevant context for APS practitioners thinking about how AI risk transfers and financial accountability frameworks evolve.
Implications for Australian agencies:
- [Monitor] Risk and procurement teams may want to monitor how AI exclusion clauses in insurance markets develop, as they could affect vendor liability and Commonwealth contract risk allocation.
- [Consider] Agencies developing AI risk frameworks could consider whether their vendor due diligence processes account for gaps in AI insurance coverage.
Retrieved from SIMS, 18 July 2026.