AI Compliance Risks, Regulatory Scrutiny and Insurance Coverage Gaps in 2026
סיכוני תאימות לבינה מלאכותית, בדיקה רגולטורית ופערים בכיסוי ביטוחי בשנת 2026
Question: AI-related exposure isbecoming a key compliance issue. How SEC 2026 priorities and insurers’ AIexclusions affect risk management and governance?
Answer: Major insurers are retreating from providing blanket liabilitycoverage for artificial intelligence (AI)-related risks. At the same time,there is an intensification of regulatory scrutiny over AI — particularly forcompanies operating in financial markets, advisory, asset management, or anysector using AI for decision-making. These developments highlight a powerfulshift - AI is no longer merely a technological or business-efficiency issue. Itis rapidly becoming a regulatory, compliance and liability issue as well.
What do the SEC 2026 Examination Priorities SayAbout AI
On November 17, 2025, theSEC’s Division of Examinations released its 2026 Examination Priorities — astatement of where the agency intends to focus its oversight in the comingyear.[1] AI is highlighted among top emerging technology risks. Keytakeaways relevant for businesses using AI, especially in a financial oradvisory context, are as follows:
*Adequate AI compliance policies: the SEC will examine firms’ use of AI —including for automated investment advice, trading algorithms, back-officetasks, compliance, anti-money laundering (AML), and other operations. It willassess whether firms have implemented adequate policies and procedures tomonitor and supervise the use of AI technologies.
* Accurate andnon-misleading AI disclosure: firms must ensure that claims related to their AIcapabilities are accurate and not misleading; that investment advice orrecommendations generated by AI are consistent with investors’ risk tolerance,objectives, and disclosed strategies; and that AI outputs are subject toappropriate human oversight.
* Governance, controls, andsecurity: the SEC will assess whether firms maintain robust governanceframeworks, third party oversight, access controls, data protection andincident response protocols, including for AI-enabled cyberattacks and modelmanipulation risks.
The SEC is signaling thatAI is no longer a niche compliance concern, it is in fact a core part of its2026 supervisory agenda. Although the SEC’s mandate covers securities,investment advisers, broker-dealers and related firms, its heightened focus onAI has broader implications. It illustrates a regulatory trend that authoritiesare increasingly alert to how AI use intersects with risk management,governance, and liability exposure.
Insurance and AI-Related Liabilities
Similar concerns aredriving major insurers in the U.S. to seek permission to exclude AI-relatedliabilities from corporate policies. The difficulty in pricing AI models’output risks has been heightened by several high-cost AI failures. Some of theinsurers have proposed exclusions barring claims related to any use of AI, somemoved for an AI exclusion for directors and officers (D&O), errors andomissions (E&O), and fiduciary liability coverage. Eliminatingcoverage for AI-generated content, inadequate AI governance and failures todetect AI-manipulated materials could significantly impact corporate AI usage,risk posture and insurance strategies.
Compliance Challenges and Recommendations
Companies using AI —whether in finance, services, product development, or internal operations —should expect that regulators and insurers will demand proper oversight andresponsible governance around AI deployment. Marketing statementsdescribing “AI-enabled capabilities” or “AI-powered products/ services” maytrigger heightened scrutiny — both from regulators and insurers. Evenoutside financial sector, organizations may need to adopt AI governancestandards similar to those expected by the SEC, including risk controls,disclosure, resilience planning, and third-party oversight.
Any firm using AI —especially in quasi-financial, advisory, or data-intensive roles — should treatAI governance as a core compliance and risk-management issue, not just atechnological upgrade. Companies should re-evaluate their use of AI forboth insurance and regulatory risks and develop adequate policies andcompliance framework for AI that includes human oversight and accountability,third party management, data-security and cyber-resilience, incident-responseplanning and documentation.
[1] SEC Division of Examinations Announces 2026 Priorities: https://www.sec.gov/newsroom/press-releases/2025-132-sec-division-examinations-announces-2026-priorities
*The contents of this message, current at the date of publication, are for reference and general informational purposes only and do not constitute legal advice. You should contact your attorney to obtain advice with respect to any particular legal matter. You should not act or refrain from acting on the basis of information in this publication without first seeking legal advice from counsel in the relevant jurisdiction. Only your individual attorney can provide assurances that the information contained herein – and your interpretation of it – is applicable or appropriate to your particular situation.
סיכוני תאימות לבינה מלאכותית, בדיקה רגולטורית ופערים בכיסוי ביטוחי בשנת 2026
Question: AI-related exposure isbecoming a key compliance issue. How SEC 2026 priorities and insurers’ AIexclusions affect risk management and governance?
Answer: Major insurers are retreating from providing blanket liabilitycoverage for artificial intelligence (AI)-related risks. At the same time,there is an intensification of regulatory scrutiny over AI — particularly forcompanies operating in financial markets, advisory, asset management, or anysector using AI for decision-making. These developments highlight a powerfulshift - AI is no longer merely a technological or business-efficiency issue. Itis rapidly becoming a regulatory, compliance and liability issue as well.
What do the SEC 2026 Examination Priorities SayAbout AI
On November 17, 2025, theSEC’s Division of Examinations released its 2026 Examination Priorities — astatement of where the agency intends to focus its oversight in the comingyear.[1] AI is highlighted among top emerging technology risks. Keytakeaways relevant for businesses using AI, especially in a financial oradvisory context, are as follows:
*Adequate AI compliance policies: the SEC will examine firms’ use of AI —including for automated investment advice, trading algorithms, back-officetasks, compliance, anti-money laundering (AML), and other operations. It willassess whether firms have implemented adequate policies and procedures tomonitor and supervise the use of AI technologies.
* Accurate andnon-misleading AI disclosure: firms must ensure that claims related to their AIcapabilities are accurate and not misleading; that investment advice orrecommendations generated by AI are consistent with investors’ risk tolerance,objectives, and disclosed strategies; and that AI outputs are subject toappropriate human oversight.
* Governance, controls, andsecurity: the SEC will assess whether firms maintain robust governanceframeworks, third party oversight, access controls, data protection andincident response protocols, including for AI-enabled cyberattacks and modelmanipulation risks.
The SEC is signaling thatAI is no longer a niche compliance concern, it is in fact a core part of its2026 supervisory agenda. Although the SEC’s mandate covers securities,investment advisers, broker-dealers and related firms, its heightened focus onAI has broader implications. It illustrates a regulatory trend that authoritiesare increasingly alert to how AI use intersects with risk management,governance, and liability exposure.
Insurance and AI-Related Liabilities
Similar concerns aredriving major insurers in the U.S. to seek permission to exclude AI-relatedliabilities from corporate policies. The difficulty in pricing AI models’output risks has been heightened by several high-cost AI failures. Some of theinsurers have proposed exclusions barring claims related to any use of AI, somemoved for an AI exclusion for directors and officers (D&O), errors andomissions (E&O), and fiduciary liability coverage. Eliminatingcoverage for AI-generated content, inadequate AI governance and failures todetect AI-manipulated materials could significantly impact corporate AI usage,risk posture and insurance strategies.
Compliance Challenges and Recommendations
Companies using AI —whether in finance, services, product development, or internal operations —should expect that regulators and insurers will demand proper oversight andresponsible governance around AI deployment. Marketing statementsdescribing “AI-enabled capabilities” or “AI-powered products/ services” maytrigger heightened scrutiny — both from regulators and insurers. Evenoutside financial sector, organizations may need to adopt AI governancestandards similar to those expected by the SEC, including risk controls,disclosure, resilience planning, and third-party oversight.
Any firm using AI —especially in quasi-financial, advisory, or data-intensive roles — should treatAI governance as a core compliance and risk-management issue, not just atechnological upgrade. Companies should re-evaluate their use of AI forboth insurance and regulatory risks and develop adequate policies andcompliance framework for AI that includes human oversight and accountability,third party management, data-security and cyber-resilience, incident-responseplanning and documentation.
[1] SEC Division of Examinations Announces 2026 Priorities: https://www.sec.gov/newsroom/press-releases/2025-132-sec-division-examinations-announces-2026-priorities
*The contents of this message, current at the date of publication, are for reference and general informational purposes only and do not constitute legal advice. You should contact your attorney to obtain advice with respect to any particular legal matter. You should not act or refrain from acting on the basis of information in this publication without first seeking legal advice from counsel in the relevant jurisdiction. Only your individual attorney can provide assurances that the information contained herein – and your interpretation of it – is applicable or appropriate to your particular situation.
