Testudo launches new insurance coverage for AI regulatory proceedings and violations

What does Testudo's new AI regulatory coverage include?

The new coverage is an additional insuring agreement and can be purchased alongside existing coverage in Testudo's generative AI liability product. The AI regulatory coverage includes:

• Defense and response costs: Costs arising from the investigation, defense, appeal, or cooperation with the regulators' proceedings.
• Regulatory fines and penalties: The civil monetary fines or penalties a regulator imposes as a result of the proceeding, where the law allows such fines and penalties to be insured.
• Algorithmic discrimination: Clarification that algorithmic discrimination-related claims arising from a violation of AI regulations or laws are covered.

Why do businesses need coverage for AI regulatory proceedings?

As more businesses deploy generative AI systems and agents, the web of AI laws and regulations they could fall foul of is expanding just as quickly. As of July 1, 2026, 164 AI-related bills had been enacted across 37 states, according to the National Conference of State Legislatures AI Legislation Database. Examples of such laws and regulations include the Texas Responsible AI Governance Act and the Colorado AI Act.

Reports of generative AI incidents involving law firms, healthcare institutions, manufacturers and educational institutions are on the rise, driving demand for affirmative cover in the event that their use of generative AI systems causes a third-party loss.

What Testudo and brokers are saying

Testudo reports that partner brokers have already seen billions of dollars of uncovered losses, and hundreds of millions of covered AI losses.

“Most businesses are deploying generative AI responsibly, but the sheer volume of US AI laws makes the legislative environment almost impossible to keep pace with. One inadvertent violation can mean fines, penalties, and investigation costs, a real balance-sheet risk. Brokers and customers have asked us for this coverage again and again, and we are proud to launch it so businesses can keep participating in the AI economy without that worry.”

Mark Titmarsh, Co-Founder & Head of Insurance, Testudo

“The race to implement the use of Generative AI to increase efficiencies, replace central business operations, and enhance service capabilities is moving at a pace that we have never seen before when it comes to technology integration. We are seeing it across all revenue sizes of businesses with many companies doing so without the proper governance and oversight. As the use of this technology continues to rise, as will the regulation and litigation surrounding this developing exposure. Testudo's product fits in its own space with traditional insurance products failing to affirmatively cover the generative output OR outright excluding losses related to these outputs. Like the old phrase we use in the cyber/tech E&O space, it's not if, it's when. The difference is the ‘when’ or loss associated with a business's generative AI output will be experienced at a much faster rate. The future is here now, the losses are here now and Testudo is the first to truly address what will be an ever-changing exposure.”

Michael Armstrong, Executive, Professional Practice Group, CRC Group