FERMA has today issued a policy note on the EU’s Artificial Intelligence Act, providing guidance on the practical implications of the risk-based approach underpinning the legislation, and considering the potential insurance impact.

The EU AI Act, published in July, will apply to all 27 EU Member States with companies expected to comply starting in February 2025. It aims to create a high level of protection of health, safety and fundamental rights against the potential harmful effects of AI systems.

The risk-based approach at its core classifies AI systems from low or minimal risk to unacceptable risk, with most regulatory requirements applying to high-risk systems.

Under the legislation, high-risk systems must be registered in an EU database and must comply with specific obligations relating to data training and governance, transparency and risk management systems.

“The AI Act is arguably one of the most significant regulations introduced by the EU in recent years given the potential impact of AI across every aspect of our lives,” said Philippe Cotelle, board member, FERMA and chair of the Digital Committee. “It not only places a clear onus on risk managers to raise their game on AI, but it also addresses another piece of the puzzle which is how this all impacts upon topics such as liability and innovation.”

The Policy Note highlights three essential pillars of an approach aimed at making the most out of the new requirements:

1. Development of an AI strategy and transposition into a suitable governance framework, which can be demonstrated by a policy document and end-to-end processes implementation.

2. Implementation of the appropriate technology and investment in the continuous training of employees and partners, as well as providing documentation and guidance for customers.

3. Governance and technology are designed in a way that anticipates audit requirements; and, pursuing a formal certification is recommended, although not explicitly required by law.

FERMA’s policy note also advises risk managers to consider analysing potential ‘silent AI’ – the unknown or unquantified exposures to AI that have the potential to impact other insurance policies.

Typhaine Beaupérin (pictured), CEO, FERMA, commented: “FERMA research has shown that most risk managers are focused on addressing AI-related risks…Having clear and targeted guidance on how the evolving legislative environment directly impacts businesses is critical to supporting practitioners in addressing this rapidly evolving risk.”

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