Learn how organizations can quantify AI risk, manage model uncertainty, and build trust as generative AI adoption scales across the enterprise. In this episode of AI Changes Everything, see how AI insurance can help organizations balance innovation, governance, and financial risk. Explore more AI topics at http://www.oracle.com/aichangeseverything In this episode of AI Changes Everything, Dr. Michael von Gablenz, head of Insure AI at Munich Re, explores one of the most important challenges facing enterprise AI adoption: how to quantify, manage, and insure against AI risk. As organizations invest in generative AI and large language models, attention often focuses on productivity, automation, and return on investment. Yet every AI system carries uncertainty. Dr. von Gablenz explains why hallucinations, inaccuracies, changing model behavior, copyright exposure, operational disruption, and financial loss must be considered alongside the potential benefits of AI adoption. The conversation examines how Munich Re is helping organizations understand the unique risk profile of AI systems and why insurance can play a critical role in enabling trustworthy AI. Drawing on examples from real-world deployments, Dr. von Gablenz explains how AI insurance can help organizations address uncertainty, evaluate model performance, and build confidence in AI-powered business processes. He also discusses the importance of continuously monitoring foundation models, assessing changing risk exposure, and understanding the downstream impact of model updates. The episode explores the relationship between operational risk management and financial risk management, highlighting why leaders need to consider both when evaluating AI initiatives. Dr. von Gablenz shares how insurance can serve not only as financial protection but also as a signal of AI readiness, helping organizations better understand whether a system is fit for purpose and capable of delivering reliable outcomes at scale. The discussion also covers AI governance, model uncertainty, explainability, trustworthy AI, and the role that chief risk officers, chief information officers, chief financial officers, and AI leaders play in responsible adoption. For organizations looking to accelerate AI deployment while maintaining trust and accountability, this conversation offers valuable insight into one of the fastest-emerging categories in enterprise technology: AI risk management and insurance. ------------------------------------------------------ Episode Transcript: 00:00:00:00 - 00:00:15:04 Unknown The views expressed in this podcast are those of the individual speakers, and do not necessarily reflect the views or policies of their organizations or iCal or its affiliates. 00:00:15:06 - 00:00:29:21 Unknown As we all race to deploy intelligence, how do we quantify the uncertainty of a large language model? Do we know what risk we're being exposed to? And how do we protect against that? 00:00:29:23 - 00:00:53:07 Unknown Hi, everyone. We're here today with, Doctor Michael von Gablenz from Munich. Re. You're the head of Insure AI. I, we're going to be talking today about the. I mean, what you're doing is quite fascinating, actually. You are, as I understand it, looking at the uncertainty around AI models and then figuring out how to insure against that particular risk, is that right? 00:00:53:12 - 00:01:13:00 Unknown Yeah. That's right. Leland, thank you so much for having me today. This is a great pleasure to be here. Very good. Okay. So can we just start a little bit by talking about what is insure AI, please, if you could just describe it. So Intuit is a team within Munich Re. In Munich re is a big insurance and insurance organization. 00:01:13:02 - 00:01:43:16 Unknown And what my team does is that it structures insurance solutions for different forms of AI risks. In particular, the risk that an AI model or generative AI model hallucinates or produces an incorrect output. From our perspective, that's one of the most pronounced risks when it comes to adoption of an AI model, simply because an organization wants to adopt an AI system or change AI system in order to support and decision making, or to automate certain processes or tasks. 00:01:43:18 - 00:02:07:19 Unknown But if you have, the model produces more mistakes or hallucinates more often than expected, then also the processes, the tasks, the executions will be wrong more often, which can lead to financial losses or liabilities down the road. And we believe that the insuring for those risks is very important. Also to drive an adoption of trustworthy AI systems throughout organizations. 00:02:07:21 - 00:02:28:13 Unknown Amazing. I meet chief AI offices almost every day, right? And CIOs, I don't think this is a market that many people realize exists. So talk a little bit about the background on how insurer I came came to be. It is something fairly recent that how long have you been looking at this area? Yeah. So being sure the first AI system in 2018. 00:02:28:13 - 00:02:53:14 Unknown Wow. This was an AI system which was already taking autonomous decisions in autonomous actions. So in the case, that we, that we did, it was basically an AI system designed to detect fraudulent credit card transactions, and users were merchants, who were relying on this AI system to make decisions within milliseconds to say, yeah, either the credit card transaction is fine. 00:02:53:17 - 00:03:20:11 Unknown Now, accept it, or it seems to be a fraud and block it. And from a user perspective. So from a merchants perspective, this poses a risk, because if the AI system accepts more fraudulent credit card transactions than expected, then the merchant as the user has more fraud costs and especially unbudgeted, fraud costs. So this poses pose the challenge for adopting the AI system. 00:03:20:13 - 00:03:53:21 Unknown And the AI provider approached, yeah. Approached uniquely to structure. Yeah. A solution insurance solution to cover, those AI error risks on behalf of the users, the merchants. Very good. And I mean, are there many players in this market at the moment? I mean, it creates huge, but other startups that are coming into this, into the space or any of the other major reinsurers or insurance companies that you also see, we're not seeing major insurance or reinsurance companies, entering the space yet, but we are seeing, several insurer techs are coming into the space. 00:03:53:21 - 00:04:15:13 Unknown So some from the market, some are from. Yeah. From San Francisco Bay area. So it seems that. Yeah, also, the venture community is picking up, on. Yeah. On this topic. And I think that's not surprising because in our mind, insurance is a fundamental. Yeah, instrument has driven many, you know, adoption of, of new technologies. 00:04:15:15 - 00:04:41:17 Unknown So when we're looking back in history, even something like you have steam boilers, the adoption of steam boilers, so they are also insurance was really fundamental. Yeah. Basically. Yeah. Analyzing the safety of those steam boilers and then, providing insurance against major catastrophe in case an interesting boiler blows up. So in my mind, this also has driven then the Industrial revolution forward had a major impact. 00:04:41:19 - 00:05:05:15 Unknown Yeah. It's interesting that you use that as like an analogy or comparable. That's exactly what I was thinking. I mean, this market could be absolutely huge, right? We look at, you know, $2 trillion of investments in AI training over the last two years, the fastest industry in humankind. I'm not going to put you on the spot and ask you to size the addressable market, but where do you see this? 00:05:05:15 - 00:05:26:22 Unknown Munich. We see this going, you know, are there any particular segments that you're focusing on or any particular industries? Can you can you give a sense to where you see the market developing place? You know, from all perspective, every company, globally is looking into adopting AI. And for every I use case where in case the AI. 00:05:27:00 - 00:05:58:18 Unknown Yeah, produces some form of a mistake, and costs occur. Those might be opportunity costs and those might be also actual costs for, for company to for example, we do some work. Well those might also then be liabilities in case an AI model is used, in some kind of customer facing, application areas in all those, those companies, and for all those kind of use cases, there exists a risk exposure there in where the access to risk exposure, the insurance might provide a solution in order to. 00:05:58:19 - 00:06:22:13 Unknown Yeah, take on take off this risk and therefore also drive adoption of this technology. Right. So all these things I hear like IP infringement hallucinations obviously is one of the big one, accuracy of these models, every single one of those is potentially an opportunity for you to provide some level of certainty and assurance of insurance around this, right? 00:06:22:15 - 00:07:08:08 Unknown Yeah. Correct. Huge opportunity. And, I mean, the MIT, yeah, has created a repository around AI risks. I think they have they are now standing at around 1700 different AI risks, which might seem quite overwhelming, but from our perspective, we bucket those risks into two classes. So one are risks which are really driven by an AI model being just at the end of the day, a statistical system with any statistical model, this uncertainty, uncertainty in the output and many of, the risks that you mentioned, the, inaccuracy, the hallucination risk, but also, things like, the copyright infringement risk, they can be traced back to incorrect output by a model. 00:07:08:14 - 00:07:33:10 Unknown And, yeah, this is now, mind a new class of risk of AI, then also new, you know, insurance solution, this new uprising, this new, underwriting considerations with also new considerations ar