Last November, seven families filed lawsuits against frontier AI developers, accusing their chatbots of inducing psychosis and encouraging suicide. These cases — some of the earliest tests of companies’ legal liability for AI-related harms — raise questions about how to reduce risks while ensuring accountability and compensation, should those risks materialize.

One emerging proposal takes inspiration from an existing method for governing dangerous systems without relying on goodwill: liability insurance. Going beyond simply compensating for accidents, liability insurance also encourages safer behavior, by conditioning coverage on inspections and compliance with defined standards, and by pricing premiums in proportion to risk (as with liability policies covering boilers, buildings, and cars). In principle, the same market-based logic could be applied to frontier AI.

However, a major complication is the diverse range of hazards that AI presents. Conventional insurance systems may be sufficient to cover harms like copyright infringement, but future AI systems could also cause much more extreme harm. Imagine if an AI orchestrated a cyberattack that resulted in severe damage to the power grid, or breached security systems to steal sensitive information and install ransomware.

The market currently cannot provide liability insurance for extreme AI catastrophes. This is for two [...]

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Outline:

(02:51) Catastrophe Bonds: A Blueprint for Insuring AI

(07:12) A Market-Driven Safety Mechanism

(10:57) Trigger Conditions

(12:54) How much could AI cat bonds cover?

(15:32) Conclusion

(17:00) Discussion about this post

(17:03) Ready for more?

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Narrated by TYPE III AUDIO.

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