IDC Perspective: AI Residual Risk Transfer - A New Frontier for P&C Insurers

This IDC Perspective explores the growing importance of insurance-backed solutions for managing AI-related risks. According to IDC's latest FutureScape: Worldwide Insurance 2025 Top 10 Predictions, by 2028, 90% of AI vendors and 50% of G2000 companies using self-developed AI are expected to rely on insurance-backed performance guarantees. This shift is anticipated to encourage one in four property and casualty (P&C) insurers to enter the AI risk coverage market. The growing need to mitigate the risks associated with AI, including performance failures and unforeseen consequences, is driving this trend, making insurance solutions essential for both developers and adopters to ensure trust and sustainability in AI innovation.The AI risk coverage market plays a crucial role in addressing the unique challenges posed by AI in modern enterprises. AI systems, while transformative, are probabilistic in nature, introducing risks that can lead to financial, reputational, and operational consequences. Traditional insurance policies often fail to cover AI-specific risks, such as model-induced biases, data security breaches, or autonomous decision-making errors. AI risk insurance provides financial protection against these incidents, allowing businesses to innovate responsibly without the fear of catastrophic failures."The rise of AI presents insurers with a once-in-a-generation opportunity to lead in risk management for emerging technologies. Traditional coverage models are not equipped to handle AI-specific risks such as hallucinations, algorithmic bias, and IP violations. To remain competitive, insurers must move beyond generic liability policies and develop specialized AI insurance products tailored to the evolving regulatory landscape and business needs. This is not just about mitigating risk - it's about enabling AI adoption responsibly and shaping the future of insurance in the digital age." - Research Manager Davide Palanza, IDC Financial Insights Europe