The AI Risk Shift
This week’s dive looks at how Trump’s AI order shifts risk from state compliance to enterprise governance for insurers.
The Signal
In this week’s In Force digest, we covered President Trump’s December 11 executive order establishing a national AI policy framework designed to preempt conflicting or burdensome state-level AI regulation and avoid a patchwork of state rules. The order directs the Attorney General to establish an AI Litigation Task Force within 30 days to challenge state AI laws deemed unconstitutional or preempted by federal law. It also instructs the Department of Commerce, within 90 days, to identify “onerous” state AI laws for potential referral to the Department of Justice. In parallel, the Federal Trade Commission and Federal Communications Commission are directed to clarify how their existing authorities may preempt conflicting state AI requirements. The order explicitly excludes certain domains from proposed preemption, including child safety, AI data center infrastructure, and state government procurement.
In today’s deep dive, we’ll expand further into why this matters, and what it means for our readers.
Why it Matters
Our quick take earlier this week:
This federal action creates significant uncertainty for the insurance industry operating across multiple states with varying AI regulations. Insurance carriers have been increasingly implementing AI exclusions for general liability coverage and developing policies around AI chatbot errors. The Trump administration’s push for federal preemption could either simplify compliance by creating uniform national standards or create prolonged legal challenges that extend uncertainty. Insurers must monitor potential litigation and outcomes as federal and state governments clash over regulatory authority, particularly given that several state insurance commissioners and regulators have expressed concerns about these restrictions.
Our Expanded take: this executive order does not simplify the regulatory environment for insurers. It reshapes where risk sits and who owns it. Federal preemption is being used as a pressure tool, not a clearing mechanism, and the result is a period of heightened uncertainty rather than relief. Carriers operating across states will face uneven enforcement, faster escalation paths, and greater scrutiny of how AI is deployed inside core insurance workflows.
For P&C executives, this is not a policy debate. It is an operating challenge. AI is already embedded in underwriting, claims, fraud detection, and distribution. That means regulatory ambiguity now intersects directly with product roadmaps, capital allocation, governance structures, and reputational risk. Waiting for courts or Congress to resolve this will leave carriers reacting mid-cycle, not leading with intent.
This deep dive explains how the executive order changes the risk profile of AI adoption in insurance, where carriers are most exposed today, and what decisions senior leaders must make over the next ninety days to keep innovation moving without losing control.
This week’s deep dive takes a single position:
The Trump administration’s AI preemption push does not reduce regulatory burden for insurers. It shifts AI risk from state compliance to enterprise governance, forcing carriers to centralize control or accept uneven exposure across products, distribution, and operations.
Our weekly deep dive delivers expanded analysis on the single most consequential signal in P&C Insurance covered in our weekly digest In Force. It includes guidance on what executives should do now, watch next, and prepare for.
