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Effective January 1, 2026, the Insurance Services Office released three new optional endorsement forms that allow carriers to exclude coverage for losses arising from generative AI under standard Commercial General Liability (CGL) policies. CG 40 47 excludes bodily injury, property damage, and personal and advertising injury under both Coverage A and B. CG 40 48 excludes only personal and advertising injury under Coverage B. CG 35 08 attaches to the Products and Completed Operations Liability Coverage Part. All three forms use a consistent definition of generative AI as systems that generate text, images, audio, video, or code. The endorsements are optional, but carrier adoption has moved quickly and is expected to be near-universal by end of 2026.

The trend is broader than the CGL line. Berkshire Hathaway, Chubb, and Travelers have already sought and received state regulatory approval to exclude AI-related damages across standard liability policies, with Florida, Connecticut, and Maryland leading approvals. Some carriers, including W.R. Berkley, have gone further with absolute AI exclusions across D&O, E&O, and cyber lines, using language that excludes any claim arising from the use, deployment, or development of AI, whether the insured built the AI or licensed it from a vendor.

A standalone AI liability market is forming in response. Munich Re, alongside startups Corgi, Armilla, Mayflower Specialty, and Embroker, are now offering standalone AI liability policies with limits ranging from $2 million to $50 million.

Separately, Roots Automation and Insurance Advocate have flagged a rising AI-driven fraud problem inside claims. AI-generated and manipulated content, including deepfake photos of home damage, staged car accident images, and synthetic medical scans, is appearing in claims across personal lines, commercial lines, and specialty coverages. Verisk has noted that traditional review methods were not designed for synthetic media.

This is the most structurally significant coverage shift in commercial P&C in years, and most commercial insureds are unaware their policies have changed at renewal. The ISO endorsements represent a deliberate, coordinated market withdrawal from a fast-growing category of exposure at the exact moment AI is being embedded across nearly every business workflow.

On April 22, 2026, California’s Senate Insurance Committee voted down SB 1076, the Insurance Coverage for Fire-Safe Homes Act, authored by Senator Sasha Renée Pérez of Pasadena. The bill failed not by a no vote but by two abstentions, receiving three of the four committee yes votes required to advance. Senators Padilla, Becker, and Menjivar voted in support. Senators Laura Richardson and Susan Rubio abstained, which in California’s committee system effectively counts as a no.

SB 1076 would have created a first-of-its-kind pilot program requiring admitted insurers to offer coverage to homeowners who brought their properties into compliance with state wildfire safety standards. It was directly spawned by the January 2025 Los Angeles wildfires, the Palisades and Eaton fires, which damaged or destroyed more than 18,000 structures and are estimated to have cost insurers approximately $41 billion.

This is the fourth consecutive failure since 2020 of legislation requiring insurers to cover fire-hardened homes. Consumer Watchdog called the defeat a failure to serve fire survivors. Three other bills from the same session, addressing claims transparency, payment delay penalties, and nonrenewal notice requirements, advanced out of committee.

The broader California context adds urgency. State Farm, the state’s largest homeowners insurer with approximately 20% market share, reached a settlement in March 2026 with the California Department of Insurance and Consumer Watchdog allowing its post-wildfire 17% average homeowners rate increase to remain in place. As part of the settlement, State Farm agreed to halt mass non-renewals in 2026 and face further rate review by 2027. The CDI separately approved State Farm’s 6.2% auto rate reduction effective May 8, 2026.

The death of SB 1076 is both a market signal and a missed inflection point. The bill’s failure means California still has no statutory mechanism to reward risk mitigation at the policyholder level. For the fourth consecutive time, the legislative path to mandatory coverage of fire-hardened homes has been blocked, leaving the availability crisis unresolved by design.

On May 6, 2026, MS Amlin, the Lloyd’s global re/insurer, launched what it describes as an industry-first Property Treaty Per Risk (PPR) Consortium. The structure brings together four Lloyd’s syndicates behind MS Amlin as lead underwriter: Nephila Syndicate 2358, Nephila Syndicate 2359, Hampden Syndicate 2689, and Apollo Syndicate 1969.

The consortium increases MS Amlin’s maximum per-risk line size from $50 million to $67.5 million, a 35% uplift, across all property per-risk lines. MS Amlin retains lead underwriting authority and claims management, creating a single coordinated interface for brokers while accessing pooled capacity through a smart-follow structure.

The stated driver is explicit. Demand for higher limits in global data centre insurance, where single-site insured values now reach $20 to $30 billion per hyperscale campus according to S&P Global Ratings, is driven by accelerating AI infrastructure investment that McKinsey projects will approach $7 trillion by 2030. The consortium structure is specifically designed to simplify large placements that previously required multiple separate syndicate negotiations. Stephen Price, MS Amlin’s Head of North American Property Reinsurance, noted that the structure introduces diversified capital from syndicates not traditionally active in property treaty.

The launch arrives in a busy period for similar structures at Lloyd’s. Earlier in 2026, Chaucer launched a smart direct and facultative property consortium on the InsurX platform, Arch Capital rolled out a $40 million intellectual property consortium in March, and Atrium received in-principle approval to launch Syndicate 2026 as a delegated property catastrophe vehicle.

The data centre insurance market is at an inflection point, and MS Amlin’s move signals that the capacity infrastructure to write it at scale is being deliberately built. AI hyperscaler investment from Microsoft, Google, Amazon, and domestic players is creating concentrations of insured value at single sites that dwarf traditional industrial risks. A single campus can carry over $20 billion in insured value. Existing per-syndicate capacity structures were not designed for that.

On April 15, 2026, Fitch Ratings published research finding that US cyber insurance direct written premiums grew nearly 11% in 2025, reversing two consecutive years of decline. Fitch identified two risk factors that temper the headline. First, the growth was volume-driven, with policies-in-force up approximately 34% while aggregate pricing continued to soften. Second, incurred direct losses deteriorated by 5 percentage points in 2025, signaling tightening margins as rates ease and participation broadens.

Fitch warned of new market entrants expanding aggressively without sufficient claims experience or technical cyber expertise, which the rating agency termed naive capacity. Fitch’s concern is that unsophisticated underwriting in cyber is not a recoverable error. Losses in a correlated cyber event, a ransomware campaign or supply chain attack, can be simultaneous and large-scale across a poorly diversified book.

Fitch specifically cited the partial release of Anthropic‘s Mythos AI model as heightening concerns in financial and cybersecurity sectors. The core argument is that AI accelerates vulnerability discovery and lowers barriers for attackers, increasing attack frequency and expanding third-party risk exposure. Fitch’s conclusion is that vulnerabilities are likely to outpace remediation efforts in the near-to-medium term.

Separately, Newfront‘s head of cyber Jennifer Wilson told Insurance Business Magazine that the cyber market remains structurally constrained by inconsistent policy language, with each carrier maintaining its own definitions, limits, and exclusions for AI-related exposures. Policy revisions that previously occurred every few years are now happening quarterly. Lockton noted in February 2026 that further cyber rate reductions are likely at least through the first half of 2026, citing aggressive growth targets from London market insurers and fresh capacity from two new MGAs and a syndicate that launched cyber portfolios in Q1 alone. DUAL has publicly warned that international cyber rates have fallen 43% since Q4 2023, pushing the sector toward a potential inflection point.

The combination of softening rates, rising losses, naive capacity entering the market, and AI materially accelerating the threat environment is a setup for a cycle turn. The timing is uncertain. It could be triggered by a single large correlated loss event. But the structural conditions are assembling. Fitch’s warning about naive capacity is pointed because in cyber, unlike property, underwriting quality is not recoverable after a loss. There is no physical asset inspection process that creates a check on coverage adequacy.

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