KBRA releases research examining how artificial intelligence (AI) is reshaping insurer operations and the implications for credit quality. As insurers move beyond experimentation toward production deployment, the central question is whether AI investments can generate measurable and sustainable improvements in underwriting, claims, expenses, and customer service while preserving effective risk management and operational resilience.

From a credit perspective, KBRA does not view AI adoption as inherently positive or negative. AI-enabled tools can improve risk selection, productivity, and operating efficiency, but they can also amplify model, data, cyber, regulatory, and third-party risks. The ultimate credit impact will depend on execution, governance, and the extent to which benefits translate into stronger financial performance without introducing disproportionate risks.

Key Takeaways

  • Execution is becoming more important than experimentation. The proliferation of pilots does not necessarily indicate a credit benefit. Moving AI into production requires reliable and readily accessible data, integration with existing workflows, cyber and compliance controls, monitoring, and employee adoption. The level of AI implementation also varies widely by insurer.

  • Underwriting and claims functions may produce the clearest near-term credit effects. Better risk selection, faster submission processing, improved fraud detection, and reduced claims leakage could support profitability. Conversely, weakly governed models could instead contribute to pricing errors, adverse selection, inappropriate claims decisions, or customer harm.

  • From a risk management perspective, governance matters more than adoption speed. Insurers with strong model inventories, validation, data controls, human oversight, documentation, escalation procedures, and clear board and management accountability should be better positioned to capture benefits while limiting downside risk.

  • Third-party dependence is an emerging risk management challenge while regulatory review frameworks become more structured. Insurers increasingly rely on external model developers, cloud providers, data vendors, and insurtech platforms. As regulatory expectations continue to evolve, insurers will need to demonstrate that AI-supported decisions comply with applicable insurance laws and industry best practices and are supported by appropriate governance, documentation, testing, and oversight. In addition to insurance-specific laws and regulations, insurers must also observe laws and regulations that cut across all industries.

  • Credit implications will depend on measurable outcomes. AI adoption alone is unlikely to influence ratings, as its credit implications will depend on the extent to which individual insurers can translate technological capabilities into measurable financial and operational benefits. Evidence should come from sustained changes in loss performance, expense efficiency, consistency and quality of growth, service, operational resilience, and the incidence of model, cyber, or regulatory challenges.

AI-related developments will be assessed through KBRA’s existing insurance rating considerations, including profitability, earnings consistency, market position, risk management, capitalization, and investment risk. Sustained improvements in underwriting performance or expense efficiency could be credit supportive; benefits that remain unproven may be credit neutral. Material implementation costs, model failures, cyber incidents, or inadequate governance could have negative credit implications. As adoption broadens, the ability to execute effectively, measure results, and maintain strong governance will be increasingly important.

Click here to view the report.

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About KBRA

KBRA, one of the major credit rating agencies, is registered in the US, EU, UK, and Japan. KBRA is recognized as a Qualified Rating Agency in Taiwan and is also a Designated Rating Organization for structured finance ratings in Canada. As a full-service credit rating agency, investors can use KBRA ratings for regulatory capital purposes in multiple jurisdictions.

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