Chaucer, a global specialty insurance and reinsurance group, has teamed up with Armilla AI to launch a new standalone third-party liability (TPL) insurance product aimed at tackling the unique risks posed by AI technologies.
The collaboration aims to address the growing concerns around mechanical underperformance in AI systems and the legal liabilities that can arise from such failures.
With AI adoption accelerating across sectors, both firms see a clear need for purpose-built insurance products that can evolve alongside the technology itself.
Chaucer brings deep expertise in specialty insurance and a global market presence, while Armilla AI offers technical knowledge and tools focused on managing AI-related risks.
Together, they have co-developed a product tailored to protect organisations from liabilities such as hallucinations (false or misleading outputs), model drift (degradation of performance over time), mechanical failures, and other AI deviations from expected behaviour. The newly launched TPL product is available to US insureds with global territorial limits and includes legal defence and liability protection.
Chaucer is leading the binder. This latest offering builds on an earlier collaboration between the two firms, which saw the introduction of a warranty-style insurance product. Their partnership began within a Lloyd’s Lab cohort focused on InsurTech innovation, with Chaucer continuing to support Armilla’s development, including sponsorship of its Lloyd’s coverholder application.
This product marks a significant evolution in AI risk management, moving from early conceptual models to comprehensive insurance coverage aimed at empowering businesses to innovate responsibly.
The insurers aim to make it easier for firms to deploy AI without fearing the consequences of unexpected system behaviours.
Tom Graham, head of partnership and innovation at Chaucer, said, “At Chaucer, we believe that AI is reshaping the risk landscape — and that requires fresh thinking from the insurance market. 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.”
Armilla AI CEO Karthik Ramakrishnan added, “Partnering with Chaucer marks a major milestone in our mission to make AI safer for everyone. Our new AI liability coverage empowers organisations to adopt cutting-edge technology; while knowing they’re protected against the unique risks AI can bring. At Armilla, we’ve pioneered advanced methodologies to identify and mitigate AI-related vulnerabilities—from early development to deployment at scale. We’re putting these insights into action through robust insurance coverage, enabling organisations to adopt AI responsibly and confidently push the boundaries of innovation.”
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