Evolving Liability Monitoring Group - summary of inaugural meeting

Liability risk is challenging to predict due to its long-tail nature and susceptibility to changing legal, technological, economic and social conditions. To adequately price and reserve for future claims, insurers must keep screening their exposures for known, latent and newly emerging loss developments.

In 2023, The Geneva Association (GA) published a report on top emerging commercial liability trends, based on a survey of its member companies. It has since set up an Evolving Liability Monitoring Group to examine on a routine basis how these trends are developing.

The group, comprised of liability risk experts from Geneva Association member firms with a significant presence in liability insurance markets, met for the first time in May 2024. Discussions at the inaugural meeting focused on the processes individual companies use to review and identify future risks, current priority themes and a deep dive on the potential liability issues raised by Generative AI.¹ The main points of discussion are summarised below.

• Most re/insurers have working definitions of emerging risks and dedicated teams to scan the horizon for latent and developing threats. But this seldom goes so far as to isolate the liability implications, at least initially, given the complexity of the associated issues.
• Among current priority liability topics for re/insurers, social inflation/tort reform, the implications of ongoing digitalisation (especially the adoption of Generative AI) as well as longstanding legacy issues such as liability for PFAS contamination and climate change, stand out.
• Generative AI – loosely defined as machine learning algorithms that can generate new content (such as images or text) from a large reference database of examples – raises several potential liability issues. These can be grouped into operational, regulatory, and litigation/reputation sources of risk.
• As with earlier technological shifts, some of the liability ramifications of Gen AI can be handled within existing liability regimes and hence may not pose intractable problems for traditional liability insurance. However, novel features of new generation software, especially Gen AI, will almost inevitably lead to changes in liability standards and legal procedures.  In the case of EU countries, for instance, the impending EU Product Liability and AI Liability Directives will introduce important new rules.