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The ISS’ re-entry raises questions about space liability. AI companies face new rules under the EU’s AI Act. Researchers discover hundreds of crypto vulnerabilities. This edition of Risk Wrap brings together six developments across compliance, governance, and insurance exposure across high-risk industries.
ISS Re-entry Exposes Gap in Space Liability Law
NASA’s plan to bring the International Space Station down over Point Nemo, a remote area of the South Pacific known as a “spacecraft cemetery,” is prompting debate over who should be responsible for environmental damage caused by space debris. Most of the station is expected to burn up during re-entry, but some dense components could survive and reach the ocean.
Under the Space Liability Convention 1972, countries can be held liable when space debris causes damage to another country’s territory, but the rules are less clear when debris lands in international waters.
The retirement of the ISS could therefore become an important test of how international law handles the disposal of space infrastructure. With the new space economy accelerating fast, governments and private operators may increasingly face these types of questions.
Implications for brokers and their clients:
- Space operators may consider third-party liability insurance to cover claims for bodily injury, property damage, or other losses suffered by third parties as a result of space debris.
- Review whether policies cover the costs arising from regulatory breaches and failures to meet applicable space and environmental requirements.
- Consider tailored space insurance policies to protect against physical loss or damage to space infrastructure and associated risks during launch, operation, and end-of-life disposal.
Source: International Business Times (June 24, 2026). Why NASA’s ISS Retirement Could Trigger a New Fight Over Who Pays for Space Debris.
Emerging insurance industries mentioned: Space Economy Insurance.
AI Firms Face New EU Transparency Rules as Article 50 Takes Effect
On August 2, 2026, the next phase of the EU’s AI Act came into force. Under Article 50, chatbots and other AI tools that interact directly with people must tell users they’re dealing with AI, unless that’s already obvious from the context.
The rules also cover synthetic content. Where required, providers of AI systems that generate or manipulate text, images, audio or video must ensure the material can be identified as AI-generated through machine-readable markings.
Users must also be informed when AI is used to recognize emotions or categorize individuals through biometric data. For certain law enforcement activities, these requirements don’t apply.
Companies that breach the rules can face penalties of up to €15 million ($17.3 million), or 3% of their global annual turnover, whichever is higher.
The next set of requirements are due to come into effect on December 2, 2027. They relate to obligations for high-risk systems in areas like biometrics, education, employment, essential services, and border management.
Implications for brokers and their clients:
- Consider tech E&O insurance in case of claims that a system failed to perform as promised, including alleged failures tied to regulatory requirements.
- Consider strengthening cyber liability insurance to cover losses and liabilities stemming from cyber incidents where sensitive biometric or personal data is exposed.
- Consider media E&O insurance to protect against claims arising from the content produced by systems, including allegations of copyright infringement, defamation, or privacy violations.
Source: Al Jazeera (August 6, 2026). What came into force with the EU’s AI Act this week – and what didn’t.
Lines of business mentioned: Tech E&O and Cyber Liability Insurance, Media Errors and Emissions Insurance.
Hemp Drinks Face New Federal Rules Under Bipartisan Bill
Bipartisan lawmakers from Texas and Ohio introduced the Beverage Regulatory Parity Act on August 10. The bill would establish a federal framework for regulating hemp-derived beverages, which would be modeled on the alcohol industry. It is intended to protect children’s rights, ensure fair competition, and provide greater certainty for operators.
The proposal would establish standards for labeling, advertising, and testing and trade practices, while requiring TTB permits, risk warnings, and a minimum purchase age of 21. It would also cap THC content at five milligrams per serving and prohibit synthetic cannabinoids and certain other compounds.
Qualifying products would have to be made with naturally occurring cannabinoids sourced from US-grown hemp and packaged and labeled domestically. An eight-cent-per-milligram federal tax would also be placed on intoxicating THC within hemp beverages.
Individual states would retain the authority to impose stricter rules or ban hemp-derived beverages altogether.
Implications for brokers and their clients:
- Investigate product liability cover in case of claims over contamination, mislabeled, or otherwise harmful hemp beverages.
- Ensure the costs of product recall are covered, in case beverages must be withdrawn from the market due to issues with testing and labeling.
- Consider obtaining cannabis insurance from providers with sector-specific regulatory expertise across jurisdictions.
Source: Cannabis Business Times (August 10, 2026). US House Lawmakers Introduce Bill to Keep Hemp Beverages Legal.
Emerging insurance industries mentioned: Cannabis Insurance.
Lines of business mentioned: Product Liability Insurance.
Crypto Security Tested as Hacks Mount and Bug Discoveries Surge
Crypto companies lost roughly $110 million to hacks in July, highlighting the unrelenting security threats facing digital assets. However, losses would have been much higher without the expanded bug bounty activity that took place, which helped uncover hundreds of vulnerabilities before they could be exploited.
A review by Immunefi showed that across 1178 top-tier audits, there was a median of zero critical or high-severity vulnerabilities. On the other hand, its 58 audit competitions revealed an average of 6.2 serious bugs per engagement, compared to 1.5 in private top-tier audits.
Immunefi said these programs prevented 374 threats in July, up from 317 in June and 339 in May.
Implications for brokers and their clients:
- Consider specialized digital asset crime insurance to cover losses from the theft of digital assets through hacking, fraud, social engineering, and other criminal activities.
- Consider business interruption insurance to cover the costs where attacks require services to be suspended.
- Investigate digital asset and web3 insurance to cover losses and liabilities arising from a broad range of risks specific to digital assets and blockchain technology.
Source: Coin Edition (August 11, 2026). Crypto Hacks Hit $110 Million in July While Bug Discoveries Rise.
Emerging insurance industries mentioned: Digital Asset and Web3 Insurance.
Lines of business mentioned: Digital Asset Crime Insurance, Business Interruption Insurance.
Australia Targets AI Training with Tougher Copyright Restrictions
On July 15, 2026, the Australian Government announced a new approach to AI governance, including mandatory national AI standards, regulation of data centers, and an Office of AI to develop and implement the framework. It’s possible that new legislation could be introduced in 2027.
Copyright is a central element of the proposal. AI systems wouldn’t be allowed to use Australian copyrighted works for training without authorization, and the copyright owner would retain control over those decisions, including whether a work could be used and on what terms.
The approach introduces several issues:
- Lack of competitive neutrality: Applying new training restrictions to future models could give existing developers an advantage if they retain the benefits of models trained on copyrighted material under less restrictive conditions.
- Learning versus copying: The reforms may need to address AI outputs that closely replicate protected creative elements without directly reproducing the original work.
- International enforcement: Enforcing the rules against overseas AI developers and securing remedies for training conducted outside Australia could prove challenging.
- AI licensing markets: Permission requirements could drive new licensing models, but there are questions about how terms will be negotiated and whether smaller creators will have sufficient bargaining power.
- The pace of AI development: Lawmakers will need to provide certainty for copyright owners and AI developers without creating rules that quickly become outdated as the technology evolves.
Implications for brokers and their clients:
- Consider obtaining Intellectual Property insurance to cover legal costs and potential damages from copyright infringement claims.
- Consider tech E&O insurance in case copyright violations result from failures in AI systems.
- Investigate tailored AI insurance that covers the above exposures and much more.
Source: JD Supra (August 7, 2026). Not So Free to Roam: Australia’s Shifting Approach to Copyright Protection in the Age of AI.
Emerging insurance industries mentioned: Artificial Intelligence Insurance.
Lines of business mentioned: Tech E&O Insurance.
FATF Report Sets New Compliance Expectations for DeFi and Financial Institutions
The Financial Action Task Force (FATF) has published its first report on DeFi, explaining how regulators, financial institutions, and VASPs can engage with DeFi responsibly and apply current AML/CTF standards proportionately.
The report recognizes DeFi’s benefits, including automated settlement, programmable financial services, and 24/7 availability, while addressing the regulatory difficulties created by its varied governance models.
According to the report, financial institutions are expected to implement a risk-based approach to DeFi. It suggests they assess their DeFi counterparties, taking into account governance structures, AML/CFT controls, and risk mitigation. Where higher-risk exposure exists, including links to bridges, mixers, cross-chain services, or protocols with limited compliance controls, firms should apply enhanced due diligence and more extensive transaction analysis.
Centralized DeFi protocols are subject to the same requirements as VASPs. That includes the above, along with sanctions compliance and in some cases, Travel Rule compliance. Truly decentralized protocols fall outside the FATF’s framework.
Implications for brokers and their clients:
- Financial institutions may review cyber insurance to confirm whether it covers the risks posed by blockchain technology.
- Consider D&O insurance to protect executives against claims alleging mismanagement or regulatory failures related to AML and CTF controls.
- Consider dedicated fintech insurance to cover the broad range of exposures the sector presents.
Source: Chainalysis (August 10, 2026). Understanding the FATF’s DeFi Report: A Functional Approach to Decentralized Finance Regulation.
Emerging insurance industries mentioned: Fintech Insurance.
Lines of business mentioned: Directors and Officers Liability Insurance, Cyber Liability Insurance.
