Insurance Outlook for LLM-Induced Risk

During the development of information systems, security, and safety considerations often take a back seat to market pressures, demanding shorter development cycles, faster releases, and new product features. Unfortunately, right until a cyber-incident, the price of the trade-off between security and safety and other market imperatives is unclear and, given the general rarity of cyber-incidents, often under-estimated. Fortunately, calculating the security and safety side of the trade-off is the domain of expertise of actuaries in insurance companies offering cyber insurances. It used to be an after-thought for most companies since the 2013 Target data breach, which cost nearly 300 million but was covered at 30% by insurance payout. Since then, insurance for risks of information systems malfunctions has become standard for most companies, and premium reduction has become a primary driver for improving cybersecurity costs for companies. The role of this chapter is to transpose what we have learned about the insurance of cyber-incidents over the last couple of decades and use it as a basis to produce a qualitative forecast of the insurance outlook for a security and safety landscape involving LLMs.