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From space debris to crypto casino regulation, this edition of Risk Wrap highlights six developments shaping compliance, governance, and insurance exposure across high-risk industries.
New ESA Report Warns of Growing Space Debris Risk
The European Space Agency’s Annual Space Environment Report offers an assessment of the state of Earth’s orbital environment. The 2025 report discusses how space traffic patterns have changed significantly since 2015, especially in Low Earth Orbit (LEO).
Growing commercial activity and increasing numbers of constellations and small spacecraft have dramatically changed the orbital landscape. The graphs below show thirdly how the area and mass occupied by constellation objects in LEO have rapidly increased.
These changing dynamics call for evaluation on whether current debris mitigation guidelines are fit for purpose. They also pose the broader question of how to manage Earth’s orbital environment as a finite resource.
Implications for brokers and their clients:
- Investigate in-orbit insurance that covers losses or impairment caused by debris strikes and technical failures.
- Look into third-party liability covers to protect against the rising risk of collisions and debris-related damage.
- Ask insurers about policies that cover decommissioning and potential fines for non-compliance with debris management rules.
Source: European Space Agency (Oct 21, 2025). ESA’s Annual Space Environment Report.
AI Adoption Is Surging in South Africa’s Finance Sector — and So Are the Risks
The Financial Sector Conduct Authority (FSCA) of South Africa recently released a report warning that AI introduces considerable risks surrounding consumer protection, market conduct, financial stability, and organizational integrity.
The report states that AI adoption in the sector is highest among banks (52%) and fintech firms (50%), with significantly lower rates among pension funds, investment firms, insurers, and non-bank lenders (below 15% for each).
A key concern is the reliance on a limited number of third-party AI service providers. Cyberattacks at any one vendor could cascade across the sector, as happened with the Crowdstrike incident last year.
Other risks include potential exposure of sensitive customer data and biased decision-making like charging higher interest rates on loans to individuals in marginalized groups. Data poisoning is another concern, where training data is infused with false information to distort a model’s output.
The FSCA recommends full transparency about when AI is used in decision-making that affects customers, rigorous testing and validation of AI systems, robust risk management frameworks, and clear incident response plans.
Implications for brokers and their clients:
- Investigate comprehensive cyber liability insurance that explicitly covers AI-enabled cyberattacks and associated recovery costs.
- Seek tech E&O insurance to protect against losses caused by AI decision errors, system failures, or flawed data.
- Investigate coverage to protect against disruptions caused by incidents affecting third-party service providers.
Source: TechCentral (December 8, 2025). Top regulator warns of AI risk in South Africa’s financial sector.
New Research Exposes System-Level Agentic AI Risks and Testing Weaknesses
Researchers from NVIDIA and Lakera AI have unveiled a new safety and security framework designed to tackle the risks posed by agentic AI.
One aspect of these systems that make the risks more complex compared to traditional LLMs is that hazards can be triggered in different parts of the workflow and then compound. It’s also more complex to test these systems effectively. LLM testing involves studying prompts and outputs, and researchers argue that applying the same tests to agentic AI misses’ system level risks.
In testing scenarios involving NVIDIA’s AI-Q assistant, 22 threat snapshots were created across categories including memory poisoning, denial of service, jailbreaks, bias, content safety, PII exposure, action completion, and cybersecurity risks. For each scenario, 21 attacks were run and each was executed five times to capture variance in behavior.
The result was over 6000 risk measurements across three evaluation nodes in the workflow. Some risks became weaker as text passed through further processing steps, while others persisted.
The researchers argue that static testing is insufficient for agentic AI and that continuous monitoring, layered safeguards, and full-workflow audits are essential to deploying it safely.
Implications for brokers and their clients:
- Investigate coverage for incident response and forensic investigations to ensure rapid support when systems are compromised or behave unpredictably.
- Investigate third-party liability insurance to address claims arising if an AI agent’s actions cause harm to customers, partners, or external systems.
- Investigate business interruption insurance that explicitly covers AI-related disruption.
Source: HelpNetSecurity (December 8, 2025). NVIDIA research shows how agentic AI fails under attack.
Could Tokenized Stocks Cause Financial Turmoil?
The American Federation of Teachers (AFT) has strongly opposed the Senate’s proposed crypto market structure bill on the grounds that it could endanger workers’ pensions and broader economic stability in the US.
A key concern is that, since companies would be able to tokenize stocks, funds may be exposed to unsafe assets and crypto-related fraud. The AFT warns that the bill could risk the savings of millions and lead to another financial crisis.
Another potential issue is that reporting and regulatory oversight under traditional securities laws may be bypassed. Investor protections could become weaker and fraud may flourish.
The AFT and various unions and lawmakers are calling for revisions to be made and for better safeguards for workers and retirees.
Implications for brokers and their clients:
- Seek crime insurance to mitigate losses stemming from potential fraud involving crypto assets.
- Investigate coverage for regulatory investigations and fines in case of failure to meet securities law requirements.
- Investigate coverage for technology and professional liability to protect against claims arising from operational errors in tokenization processes or failures in due diligence.
Source: CoinCentral (December 10, 2025). AFT Warns Senate: Crypto Bill Puts Pensions at Risk and Threatens Economic Stability.
Crypto Casinos Face Escalating Compliance Challenges
Blockchain adoption is changing how gambling operators are regulated. According to the World Lotteries Association, over 120 countries are moving to oversee crypto-based gambling.
Companies face heightened expectations around AML, cross-border rules, and data transparency, while gaps surrounding self-regulation, player protection, and tax reporting remain.
Compliance obligations vary widely by jurisdiction. A casino can be fully legal in one market and prohibited in another, making geo-blocking and stringent KYC tools necessary.
In some states (including Nevada) and some EU nations, crypto gaming is only allowed if the operator’s license explicitly covers blockchain payments. The EU is looking to harmonize crypto gaming rules with its broader crypto regulations, while the UK Gambling Commission is exploring the option to include crypto in remote gambling licenses. In some countries, the use of crypto in gambling is considered a gray area and is banned.
Regulators typically require independent audits, strong random number generation, and verified smart contract code. They also expect technological solutions to be used to manage loss limits and self-exclusion.
Decentralized casinos complicate things further, while hybrid casinos that only use blockchain for payments or fairness features are more straightforward yet still face strict reporting rules.
On the whole, the integration of blockchain into gambling is disrupting compliance and this trend isn’t likely to slow down any time soon.
Implications for brokers and their clients:
- Secure coverage for legal defense costs and penalties in case of breaching licensing, AML, or reporting requirements.
- Cyber liability insurance is necessary to protect against exploits or hacks affecting player funds or transactional integrity.
- Tech E&O insurance and smart contract failure insurance can safeguard against claims related to errors linked to blockchain integrations.
Source: CoinPaper (December 9, 2025). How Blockchain Integration Affects Cryptocurrency Casino Regulation.
Securities Litigation Intensifies Across Biotech, AI, and Crypto
Reports by consulting firms Cornerstone Research and NERO explain that securities class action lawsuits are rising in the biotech, AI, and crypto sectors. Alleged losses and average settlement values are climbing due to “mega filings”, where the dollar-value change in the company’s market capitalization during the period in-question is in the billions. The average settlement in H1 2025 was $56 million, which was a 27% increase from 2024.
According to Cornerstone Research, there were 42 filings in the consumer noncyclical sector compared to 32 in H2 2024, caused by filings in biotechnology and pharmaceutical sectors. In addition, 44% of filings in H1 2025 involved allegations of missed earnings guidance, the highest percentage in five years. 33% involved allegations of misled future performance.
Implications for brokers and their clients:
- Investigate comprehensive D&O insurance to safeguard leadership when disclosures, forecasts, or risk statements become the focus of investor lawsuits.
- During M&As, obtain representations and warranties insurance (as a buyer or seller) to protect against allegations of misrepresentation.
- Seek securities liability insurance to protect against claims arising from stock drops linked to clinical results, regulatory delays, or unmet development expectations.
Source: JD Supra (August 29, 2025). Securities Class Action Trends: AI and Biotech Cases Continue to Rise, Uptick in Alleged Losses and Average Settlement Values.
