AI boom breaks risk silos as exposures converge, demanding a new approach

AI is driving digital risk beyond traditional cyber threats, creating new accumulation challenges across insurance lines, borders and interconnected technology ecosystems in APAC.

Key points:
APAC becomes digital growth engine
AI, digital risks open new opportunities
Tech concentration raises accumulation risk

AI is turning digital risk from a cyber problem into an accumulation challenge that can cut across classes, borders and entire technology ecosystems. In Asia-Pacific, where adoption is accelerating rapidly, insurers will need more than capacity to keep pace.

Carlos Grijalva, APAC head of cyber at Gallagher Re, says the opportunity is substantial, but so too is the need to understand how increasingly interconnected technologies can concentrate exposure.

“Technology is reshaping the nature of risk in ways that challenge traditional insurance thinking,” Grijalva told SIRC Today. “The industry has a unique opportunity to evolve alongside these changes, but doing so requires a deeper understanding of digital dependency, accumulation risk and interconnected technology ecosystems.”

Only a few years ago, cyber discussions centred largely on ransomware, data breaches and resilience. Today, the conversation has widened to include AI, cloud concentration, digital supply chains and critical infrastructure dependencies.

“The most significant change has been the speed at which digital risk has expanded beyond traditional cyber exposures,” he said.

That shift is particularly visible across APAC. Organisations in Singapore, Australia, Japan, South Korea and India are embedding AI into their operations, while governments and businesses continue to invest heavily in cloud infrastructure and digital transformation. Southeast Asia is also becoming a major hub for data centre development, creating new concentrations of exposure.

“What has become increasingly clear is that insurers can no longer assess these risks in isolation,” Grijalva said. “A single technology failure can potentially impact thousands of organisations across multiple countries, portfolios and lines of business.

“The challenge has shifted from understanding individual cyber events to understanding interconnected digital ecosystems and the accumulations they create.”

Beyond cyber

AI is changing both the risk profile of insureds and the way insurers operate.

Financial institutions in Singapore and Hong Kong are using AI for customer engagement and decision support. Manufacturers in Japan and South Korea are deploying it across production environments, while technology companies throughout the region are embedding it directly into products and services.

“This creates new opportunities but also introduces another layer of complexity around liability, decision-making, operational resilience and systemic risk,” Grijalva said.

Those exposures do not fit neatly into a single insurance class. AI-related losses can touch cyber, professional indemnity, directors’ and officers’ liability, errors and omissions, product liability and other lines simultaneously.

For insurers, the challenge is therefore not simply identifying the risk but understanding where it sits and how it could accumulate across a portfolio.

Grijalva sees three areas becoming particularly important.

The first is liability. Organisations could face claims arising from inaccurate outputs, automated decision-making, algorithmic bias or failures involving AI-enabled processes.

The second is dependency on a relatively concentrated technology ecosystem. Many organisations rely on the same hyperscale cloud providers, foundation models and digital infrastructure, creating the potential for systemic loss if a critical provider fails.

The third is the changing cyber threat itself.

“Threat actors are increasingly leveraging AI to improve social engineering, automate reconnaissance and scale attacks,” he said. “At the same time, businesses are embedding AI into critical operations, increasing the potential impact of system failures.”

 “AI and digital transformation represent enormous opportunities for businesses and insurers across APAC.”

Accumulation risk

For insurers, the common thread is accumulation. 

“Insurers need to move beyond traditional product silos and adopt a more holistic view of digital risk,” Grijalva said.

That starts with better visibility of the technology dependencies underpinning insured portfolios, including cloud platforms, AI providers, digital supply chains and data centre ecosystems.

“Geographic diversification alone may no longer reduce concentration risk as effectively as it once did,” he warned.

Underwriting and exposure-management frameworks will also need to evolve to capture technology-driven accumulation more effectively, while greater investment in digital risk engineering, scenario analysis and data-led underwriting can help identify vulnerabilities before losses occur.

“The market has always adapted to emerging risks. AI is no different, but it requires a more connected and forward-looking approach,” Grijalva said. “It is no longer one insurance class. It is no longer one geography.”

“APAC is becoming the world’s digital growth engine, with unprecedented investment in AI, cloud infrastructure and data centres.”

Technology-driven business interruption is also likely to become increasingly important. As businesses become more reliant on interconnected digital services, outages affecting cloud providers, software platforms or critical technology suppliers could generate losses across multiple sectors simultaneously.

The issue is particularly relevant as APAC attracts substantial investment in digital infrastructure, including data centres in markets such as Singapore, Malaysia, India and Australia.

“APAC is becoming the world’s digital growth engine,” Grijalva said. “We’re seeing unprecedented investment in AI, cloud infrastructure and data centres across the region. The opportunity is enormous, but so is the importance of understanding how digital dependencies accumulate across industries and borders.”

Beyond capacity

Reinsurance has an important role to play in helping insurers respond to that uncertainty while continuing to support innovation.

As digital risks evolve, Grijalva argues that reinsurers can provide not only capacity but also expertise around accumulation, systemic exposure and portfolio resilience.

“This is particularly important in APAC, where digital adoption is accelerating rapidly and clients are asking more sophisticated questions about AI, cloud dependency and technology concentration,” he said.

Gallagher Re has launched a Digital Risk practice bringing together expertise across cyber, AI liability, data centres and digital risk engineering to give insurers a more complete view of the risk landscape.

“Our objective is not simply transferring risk,” Grijalva said. “It is helping insurers build confidence to write new and evolving forms of digital risk while maintaining resilience.

“Ultimately, we aim to help clients move beyond identifying risks and towards quantifying and managing them more effectively.”

For Grijalva, that will increasingly define the insurance response to digital growth in APAC. The opportunity is not simply to cover more technology risk, but to understand how those risks connect before those connections turn into losses.

Carlos Grijalva is the APAC head of cyber at Gallagher Re, and can be contacted at: Carlos_Grijalva@gallagherre.com

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