Insurers Balk At Paying Out Huge Settlements For Claims Against AI Firms

An anonymous reader quotes a report from the Financial Times: OpenAI and Anthropic are considering using investor funds to settle potential claims from multibillion-dollar lawsuits, as insurers balk at providing comprehensive coverage for the risks associated with artificial intelligence. The two US-based AI start-ups have traditional business insurance coverage in place, but insurance professionals said AI model providers will struggle to secure protection for the full scale of damages they may need to pay out in the future. OpenAI, which has tapped the world's second-largest insurance broker Aon for help, has secured cover of up to $300 million for emerging AI risks, according to people familiar with the company's policy. Another person familiar with the policy disputed that figure, saying it was much lower. But all agreed the amount fell far short of the coverage to insure against potential losses from a series of multibillion-dollar legal claims.

Two people with knowledge of the matter said OpenAI has considered 'self insurance,' or putting aside investor funding in order to expand its coverage. The company has raised nearly $60 billion to date, with a substantial amount of the funding contingent on a proposed corporate restructuring. One of those people said OpenAI had discussed setting up a 'captive' -- a ringfenced insurance vehicle often used by large companies to manage emerging risks. Big tech companies such as Microsoft, Meta, and Google have used captives to cover Internet-era liabilities such as cyber or social media. Captives can also carry risks, since a substantial claim can deplete an underfunded captive, leaving the parent company vulnerable. OpenAI said it has insurance in place and is evaluating different insurance structures as the company grows, but does not currently have a captive and declined to comment on future plans.

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