Armilla Insurance Services, a Lloyd’s coverholder, has launched a groundbreaking AI Liability Insurance policy aimed at addressing the rising risks tied to artificial intelligence failures. The policy, underwritten by Lloyd’s underwriters, including Chaucer, offers explicit and affirmative coverage for businesses deploying AI systems.

“Businesses are racing to deploy AI, but their risk management and insurance tools haven’t kept pace,” says Karthik Ramakrishnan, CEO of Armilla. He warns of “silent AI cover”—the uncertainty over whether traditional policies would respond to AI-specific failures.

“Our AI Liability Insurance provides clear, affirmative coverage, giving businesses the confidence to innovate responsibly,” he adds.

Unlike conventional tech errors and omissions (E&O) insurance, which often excludes custom models or shifts liability onto users, Armilla’s offering is designed specifically for AI-related risks. It covers legal costs and damages resulting from AI underperformance, including hallucinations, critical errors and failures to perform as intended.

With the regulatory scrutiny intensifying globally, Armilla’s policy aims to provide a safety net for companies navigating this evolving landscape.

With high coverage limits and a novel trigger mechanism, Armilla and Chaucer are positioning this policy as a new standard for managing the liabilities of the AI age.