By Jack Keilty (Head of Management Liability & Financial Institutions), Anthony Kerr (Senior Client Manager & Claims Advocate) and James Bullock-Webster (Head of Tech, Media & Cyber) at New Dawn Risk
This article was originally published in Emerging Risks.
Artificial Intelligence is transforming boardrooms, professions, and cyber defences, but it is also creating new exposures, says New Dawn Risk’s Jack Keilty, Anthony Kerr, and James Bullock-Webster.
Artificial Intelligence (AI) is no longer a futuristic talking point. It is embedded in the way companies make decisions, deliver services and defend themselves against cyber threats. Yet as adoption accelerates, so too does exposure. For insurers and brokers, the impact of AI on liability lines will be one of the defining challenges of 2026.
The risks are not abstract. In November, Jaguar Land Rover reported heavy losses after a cyberattack left it unable to operate its highly-automated production lines. For the three months to the end of September, the carmaker posted a £485m loss compared with a profit of £398m a year earlier, alongside £196m in additional cyber-related costs. It is a stark reminder that automation and AI, while efficient, can also create single points of failure with significant financial consequences.
PI: human judgement under strain
Professional indemnity (PI) exposures are evolving and there is a risk of . Anthony Kerr, Senior Client Manager and Claims Advocate, warns against overreliance on algorithms.
AI is essentially a tool, and like any other tool, it needs an accountable human at the helm. When that human takes their hands off the wheel, letting the tool become the business while they act as an investor, that’s when problems start.
Professions from law to medicine are adopting AI to augment expertise. But when advice or treatment is guided by algorithms, liability questions multiply. Errors in output, over-reliance on systems, and cross-border disputes all complicate claims. PI insurers must prepare for hybrid liabilities that blend human error with technological failure.
Cyber: the arms race intensifies
Cyber insurance is more advanced when it comes to grappling with AI risk, but there are still significant unknowns. James BullockWebster, Head of Tech, Media, and Cyber, highlights the scale of the challenge.
Automated phishing campaigns can overwhelm systems, and deepfake audio and video make social engineering and high-value fraud harder to detect. The expectation of loss is rising, fuelled by social inflation and the sheer sophistication of AI-enabled threats.
This means that cyber insurers must adapt to cover failures of AI-driven protection while recognising the escalating capabilities of attackers.
D&O: silent on AI, but not immune
Jack Keilty, Head of Management Liability and Financial Institutions, points out that directors’ and officers’ (D&O) policies remain largely untested when it comes to AI.
D&O policies tend to be silent on AI – it’s not specifically excluded or covered – and that will be the case until there is a big claim, and the market can examine how to mitigate the risk. The key question is: ‘Is it covered?’ and the answer is ‘Yes, for now’.
Boards are increasingly reliant on AI-driven insights for strategic decisions. If those insights prove flawed, directors may face claims that they failed to exercise proper oversight. Regulators are already signalling that boards must demonstrate understanding of AI systems. Shareholder activism adds another layer of pressure. The liability landscape is shifting, even if policy wordings have yet to catch up.
Preparing for 2026
As we look ahead, New Dawn Risk believes the market must act decisively. Liability policies will need to evolve to address AI-specific exposures, from algorithmic mismanagement to failures of AI-driven cyber defence. At the same time, insurers and brokers must engage closely with regulators to help shape frameworks that clarify accountability in the use of AI.
Risk transfer alone will not be enough; clients will require guidance on governance and best practice if they are to navigate this new landscape with confidence.
AI is reshaping liability lines in real time, and by 2026 its impact will be unavoidable. PI, cyber, and D&O insurers will face claims that reflect blurred boundaries between human and machine responsibility. The challenge for cyber technology companies will be to develop solutions that help to build trust in AI so that clients can use this technology with confidence. For New Dawn Risk, the challenge is clear: to lead the market in developing solutions that protect clients, support innovation, and build trust in an AI driven world.
