As generative artificial intelligence becomes more integrated into commercial operations, insurers are adjusting policy language to address emerging risks. At the same time, litigation tied to AI development, deployment, and disclosure continues to grow, prompting broader use of exclusions and endorsements in liability policies.

Insurers have introduced provisions designed to limit or eliminate coverage for AI-related exposures. However, the scope and enforceability of these exclusions remain uncertain. Some carriers require narrower coverage through endorsements, while others offer policies with affirmative AI-specific coverage. Courts have yet to fully address how these exclusions will apply, particularly where coverage could be significantly limited.

AI-Related Claims Span Multiple Legal Theories

Recent litigation reflects a wide range of AI-related claims. These include copyright and intellectual property disputes tied to training large language models, such as Bartz v. Anthropic, which reportedly settled for $1.5 billion. Product liability and negligence claims have also emerged, including Raine v. OpenAI, Inc., involving alleged real-world harm.

Privacy and data-use claims continue to develop, as seen in Reddit, Inc. v. Anthropic PBC, which challenges the use of scraped data for AI training. Antitrust allegations, such as Chegg, Inc. v. Google LLC, focus on the use of proprietary data in AI systems. Additional cases involve discrimination and algorithmic bias, including Mobley v. Workday, Inc., as well as securities class actions tied to disclosures about AI capabilities, such as D’Agostino v. Innodata Inc.

This breadth of litigation has led insurers to adopt broader exclusionary language.

Insurers Introduce Broad AI Exclusion Language

Some carriers have implemented what they describe as “absolute” AI exclusions in directors and officers, errors and omissions, and fiduciary liability policies. These provisions may apply to claims arising from AI use, related disclosures, regulatory requirements, or alleged violations of AI-related laws.

In some cases, definitions of artificial intelligence are expansive. One insurer defines AI as any machine-based system that generates outputs such as predictions, content, or decisions based on input data. This definition can include tools that have been used in business operations for years.

Other insurers have adopted targeted exclusions focused on generative AI, including systems that produce text, images, audio, or synthetic data in response to user prompts. These provisions may reference tools such as ChatGPT, Bard, Midjourney, or DALL-E.

The Insurance Services Office has also introduced optional endorsements for commercial general liability policies. These include exclusions applying to bodily injury, property damage, personal and advertising injury, and products and completed operations liability when claims arise from generative AI.

Courts May Interpret Exclusions Narrowly

Legal standards governing policy interpretation remain relevant. Courts generally construe coverage provisions broadly and interpret exclusions narrowly. Insurers may still have a duty to defend claims that include both AI-related and non-AI-related allegations.

Coverage may also apply when an alleged injury could occur independently of AI use or when claims do not clearly fall within the exclusion. In cases involving mixed allegations, insurers may be required to defend the entire action if any portion is potentially covered.

Courts have also addressed illusory coverage, holding that exclusions should not eliminate the fundamental protections a policy is intended to provide. Additionally, earlier policies issued before AI-specific exclusions may still offer coverage, as changes in policy language over time can influence how courts interpret prior forms.

The global M&A insurance market entered 2026 with continued momentum, even as deal activity remained uneven and macroeconomic conditions stayed uncertain. Transactional risk insurance is now a standard component of deal execution across private equity, corporate M&A, secondaries, carve-outs, restructurings, and financings.

In 2025, the market showed not only resilience but also deeper integration into the transaction strategy. Buyers and sellers increasingly use insurance to improve bid competitiveness, facilitate clean exits, and manage post-closing risk. This trend was especially visible in sponsor-led transactions, where insurance is now embedded in execution planning rather than applied opportunistically.

Private Capital and Insurance Alignment

The relationship between private capital and insurance continued to evolve. Large asset managers are partnering with insurers to combine long-term balance-sheet capital with private-market investment strategies. Platforms such as Apollo and Athene, as well as KKR and Global Atlantic, illustrate this convergence. As a result, insurance is becoming more capitalized and more central to transaction structuring.

Capacity Remains Strong, Pricing Begins to Shift

Capacity remained strong across global markets in 2025. Insurers continued to compete actively, supporting low premiums, broad coverage, and reduced retentions. Tipping-to-nil structures and, in some cases, nil-retention outcomes remained available.

However, pricing began to show early signs of adjustment in certain segments as insurers responded to claims activity. Underwriting discipline is increasing, and pricing is expected to become more differentiated in 2026.

Claims Activity Shapes Underwriting Behavior

Claims trends are playing a larger role in shaping underwriting behavior. Notifications are rising, and paid claims are becoming more visible. While frequency remains manageable, severity is influencing insurer decision-making.

Underwriters are placing greater scrutiny on financial statements, tax exposure, compliance, and sector-specific risks. In addition, claims-handling capability is becoming an increasingly important factor in insurer selection.

Regional Market Developments

Regional trends varied across markets. In the UK and EEA, competition remained strong, particularly in the lower and mid-market. Infrastructure and real estate transactions often achieved favorable terms, while technology and healthcare saw higher retentions.

In the United States, deal value increased due to larger transactions, although middle-market volume remained softer. Insurance use in secondary transactions and continuation vehicles has expanded significantly and is now more widely adopted.

Canada experienced early disruption due to tariff uncertainty but stabilized later in the year. Smaller transactions increasingly use insurance, supported by lower pricing and modest retentions.

In the Asia-Pacific region, M&A activity improved, with strong contributions from India, South Korea, and Japan. Competitive insurance conditions persisted, and seller-initiated structures became more common in Australia and New Zealand.

India continued to demonstrate market maturity, with broader adoption across transaction sizes and increased use of insurance post-closing. In the Middle East, deal activity remained high, but insurance penetration lagged, although growing familiarity and the first reported paid claim may support future adoption. Africa and Latin America also saw gradual expansion, with increased insurer participation and improved pricing in certain sectors.

Expanding Use of Specialized Products

Tax insurance continued to grow across regions and is now used beyond transaction-specific risks. Contingent risk insurance also gained traction as a tool to address specific legal or regulatory issues that could delay deals.

Meanwhile, insurance due diligence expanded in scope, with a greater focus on operational risks and post-closing considerations.

Outlook for 2026

The market remains active, supported by capital availability, product innovation, and ongoing deal demand. However, underwriting discipline and risk assessment are becoming more central as claims experience and external pressures continue to shape the market.