Relm’s RESCAAI Solution: Innovative Insurance for AI-Exposed Operations

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Relm’s RESCAAI Solution: Innovative Insurance for AI-Exposed Operations

02/05/25 - In 2024, insurance brokers would be hard pressed to find clients who aren’t using a modicum of third-party artificial intelligence technology.

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PwC’s 2024 US Responsible AI Survey, released last August, noted that 73% of the executives surveyed said they use or plan to use AI and generative AI, yet only 58% of respondents have completed a preliminary assessment of AI risks to their organization.

Furthermore, only 11% of executives had succeeded in what PwC calls ‘Responsible AI Implementation’ — of which third-party risk management is one of 11 key capabilities.

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Relm believes that AI insurance coverage is vital in aiding clients to manage these third-party AI risks. Security breaches, system malfunctions, and operational disruptions are not just possible; they’re increasingly likely as businesses rely more heavily on these technologies.

When AI systems fail, the impact can be far-reaching—affecting not just the technology but also the business’s bottom line, reputation, and ability to operate. Which is why we’ve launched a host of AI insurance products, with RESCAAI specifically tailored to meet operational risks.

RESCAAI: Insurance Coverage Designed for Operational Risks

RESCAAI is a first-party response policy designed specifically for businesses that integrate third-party AI into their operations or products.

RESCAAI adds protective rigor to organizations exposed to operational and financial disruptions caused by AI failures.

The policy addresses four critical areas of risk:

Business Interruption: Protects the insured’s income if a third-party AI system failure or breach disrupts operations.
Reputational Harm: Covers the insured’s lost income and extra expenses incurred as a result of negative media exposure tied to AI issues.
Product Recall Expenses – Reimburses expenses for recalling products from the market due to AI system failures or breaches, minimizing the financial impact of addressing customer safety concerns.
Incident response costs: Funding the investigation into the scope and source of the AI failure, enabling the client to diagnose the issue and fix it, minimizing downtime.

Claire Davey, Relm Insurance’s Head of Product Innovation and Emerging Risk, explains: “RESCAAI is designed to safeguard businesses against the financial and operational fallout of AI failures. Whether it’s a disruption to revenue caused by a third-party AI malfunction or the need to recall products following a security breach, our policy ensures companies have the support they need to mitigate losses and restore operations efficiently.”

Real-World Applications: Protecting AI-Exposed Operations with RESCAAI

Insured Scenario: AI-Driven Operations Interrupted by a Security Breach

An e-commerce platform relying on a third-party AI engine to deliver personalized product recommendations and optimize inventory management.

During a high-stakes, time-sensitive event like Black Friday sales, the AI system suffers a security breach, rendering it inoperable. Customers experience delayed page loads and inaccurate product suggestions, leading to abandoned carts, revenue loss, and a wave of customer complaints on social media.

As news of the disruption spreads, the company faces reputational harm and immediate financial pressure. RESCAAI provides critical support via income reimbursement and incident response costs, including forensic investigations to assess and mitigate the breach. This ensures the company can restore operations efficiently while managing reputational fallout.

Insurance Broker Risk Scenario: Where RESCAAI Fits In

For brokers, RESCAAI offers a unique opportunity to address the coverage gaps clients face when relying on a third party’s AI.

Broker Scenario: AI-Driven Product Recall

An insurance broker works with a manufacturing client that incorporates third-party AI technology into their smart products — specifically, an interactive toy line powered by AI to process voice commands and provide a personalized user experience.

In this scenario, the AI system that drives the voice recognition and response functionality malfunctions due to a software bug introduced during an update. As a result, the toys start malfunctioning unpredictably, creating potential safe-guarding risks for children. The company faces the need to issue a large-scale product recall to mitigate the risks.

Without specialized coverage, the client faces multiple financial exposures, including:

AI-related product recall expenses: Costs related to retrieving the defective units, disposing of them, compensating customers, and manufacturing replacement products. These expenses are often far-reaching, as they involve not only direct product recall costs but also the logistics and customer service infrastructure needed to manage the process.

Reputational damage: A failure in AI functionality—especially in a consumer product—can lead to significant damage to the brand’s reputation. The media fallout and consumer backlash may result in a loss of market share, reduction in customer loyalty, and increased scrutiny from regulatory bodies.

Operational disruption: The company is forced to suspend production and distribution to fix the AI issue, which impacts ongoing operations and future product timelines. This can also lead to significant revenue loss due to the disruption in supply chains and potential delays in product launches.

Gaps in coverage may reside between traditional product liability policies, business interruption policies, and cyber incident response policies.

This is where RESCAAI’s holistic solution provides first-party protection specifically designed for organizations relying on third-party AI technologies to deliver their products or services.

For brokers, this policy offers a robust, specialized solution that traditional commercial lines might overlook, filling a crucial gap in coverage for clients integrating third party AI into their operations or products. Offering RESCAAI positions the broker as a forward-thinking advisor capable of addressing complex risks emerging from AI system dependencies. By recommending RESCAAI, brokers can help their clients to:

Close the coverage gap: Ensure the client is protected from the financial fallout of AI system failures that lead to product recalls or operational shutdowns, which are not typically covered under general product liability or commercial policies.

Mitigate reputational risks: Help clients safeguard their brand against the fallout of a product recall or operational disruption driven by third-party AI failure, allowing them to manage the reputational damage and restore consumer confidence.

Enhance risk management strategy: Address the unique and evolving risks tied to AI technology integration, offering clients tailored protection as they navigate the complexities of embedding third-party AI into their products and operations.

Future-Proofing Business Operations with RESCAAI

With AI integrations proliferating, innovative companies are offsetting risks associated with integrating third-party AI solutions. Relm Insurance’s RESCAAI policy offers a proactive approach to mitigating these risks, empowering businesses to embrace innovation with confidence.

RESCAAI is one of Relm’s three AI insurance solutions, along with NOVAAI and PONTAAI. Read more on the other offerings in the links below or reach out via the contact box to for more information on how RESCAAI can safeguard your clients’ operations.