Artificial Intelligence (AI) is transforming the insurance industry—and regulators are paying close attention. The National Association of Insurance Commissioners (NAIC) has been working diligently to keep pace with this evolving technology, introducing guidance and tools to help insurers manage AI responsibly.
In August 2020, the NAIC adopted its Principles on Artificial Intelligence, followed by the model bulletin “Use of Artificial Intelligence Systems by Insurers” in December 2023. These steps underscore the growing importance of AI governance in insurance operations.
Looking ahead, the NAIC’s Big Data and Artificial Intelligence Working Group plans to pilot the AI Systems Evaluation Tool in early 2026. This tool is designed to help regulators—and insurers—evaluate AI-related risks. It includes:
- Exhibit A: Quantifying AI System Use
- Helps scope AI usage and determine inherent risk levels.
- Exhibit B: AI Systems Governance Risk Assessment Framework
- Covers policies, risk assessments, and controls—including third-party oversight.
- Exhibit C: High-Risk Model Details
- Guides regulators in evaluating models deemed high-risk and their material impact.
- Exhibit D: AI Systems Model Data Details
- Identifies data elements and AI system types for transparency.
While the is expected to launch in 2026, additional feedback may still shape the final tool. The pilot is expected to include 10-12 participating states that will use the Evaluation Tool in their financial and market conduct examinations. Now is the time to develop a strategic game plan for AI governance.
Why This Matters for Insurers
AI is no longer optional—it’s a competitive necessity. But with opportunity comes responsibility. Regulators expect insurers to integrate AI oversight into Enterprise Risk Management (ERM) and Own Risk and Solvency Assessment (ORSA) frameworks. Failure to do so could lead to compliance challenges and reputational risk.
The key question every insurer should ask: Which AI use case will have the largest impact on your organization?
How We Can Help
At MarksNelson, we partner with insurers to navigate this complex landscape. Our advisory team offers:
- AI Governance Framework Development
Build policies, controls, and oversight structures aligned with NAIC principles. - Regulatory Compliance Support
Ensure your AI strategy meets evolving NAIC standards and state requirements. - Risk Assessment & ORSA Integration
Incorporate AI risks into enterprise risk management and solvency assessments. - Model Validation & Transparency
Evaluate high-risk AI models for accuracy, fairness, and regulatory readiness. - Strategic Planning for AI Adoption
Identify high-impact use cases and align them with your business objectives.
