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Daniel Schwarcz @danielschwarcz.bsky.social · 13d

This framework draws on principles of consumer financial regulation and lessons from the EU’s new AI Act. It seeks to balance the promise of AI-driven financial advice with the need to protect consumers from significant harm. Check it out!

Daniel Schwarcz @danielschwarcz.bsky.social · 13d

Our solution is a dual regulatory approach: (1) a licensing requirement for robo-advisors that use generative AI to match consumers with products, and (2) heightened duties of care and loyalty for all robo-advisors.

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Daniel Schwarcz @danielschwarcz.bsky.social · 13d

We argue that the current U.S. regulatory framework is not up to the task. Existing rules fail to prevent AI-enabled robo-advisors from providing conflicted, inaccurate, or manipulative advice on a large scale.

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Daniel Schwarcz @danielschwarcz.bsky.social · 13d

Generative AI can make customized financial advice widely available. But because it mimics human advisors so convincingly, it also creates serious risks that consumers will be nudged into costly or inappropriate products

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Daniel Schwarcz @danielschwarcz.bsky.social · 13d

I’m excited to announce the publication of Regulating Robo-Advisors in an Age of Generative Artificial Intelligence in Volume 82 of the Washington & Lee Law Review . The article is co-authored with @notthattombaker.bsky.social & Kyle Logue. lawreview.wlulaw.wlu.edu/regulating-r...

Regulating Robo-Advisors in an Age of Generative Artificial Intelligence – Washington and Lee Law Review

lawreview.wlulaw.wlu.edu

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Reposted by Daniel Schwarcz

Minnesota Law @umnlawschool.bsky.social · 16d

@danielschwarcz.bsky.social’s article, "Obamacare for Homeowners Insurance: Fixing America's Broken Insurance Markets in a Time of Climate Change," 49 Harvard Environmental Law Review (2025), is now available on @ssrn.bsky.social.
z.umn.edu/aq4n.

SSRN; "Obamacare for Homeowners Insurance: Fixing America's Broken Insurance Markets in a Time of Climate Change," 49 Harvard Environmental Law Review (2025); Prof. Dan Schwarcz

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Daniel Schwarcz @danielschwarcz.bsky.social · 29d

Check out the broader law review article, The Limits of Regulating AI Safety Through Liability and Insurance: Lessons From Cybersecurity. on which our Lawfare piece is based here: papers.ssrn.com/sol3/papers....

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Daniel Schwarcz @danielschwarcz.bsky.social · 29d

🚨 New on @lawfaremedia.org -- Josephine Wolff & I argue that the push to impose liability on AI companies won’t make AI safer—because insurers, not courts, will shape how liability plays out. And history from cyber insurance shows insurers don’t incentivize real safety.

Lawfare @lawfaremedia.org · 29d

Pulling on lessons from the ineffectiveness of cyber insurance in mitigating cyber risks,
@danielschwarcz.bsky.social and Josephine Wolff argue that liability will not effectively promote AI safety.

Why Liability and Insurance Won’t Save AI: Lessons From Cyber Insurance

Holding AI developers responsible for any harm their systems cause may not be the most effective path to promoting AI safety.

www.lawfaremedia.org

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Daniel Schwarcz @danielschwarcz.bsky.social · Sep 5

8/ Without bold reform, insurance instability could cascade into a wider housing and financial crisis. With reform, it can be harnessed to build resilience. Full argument in Harvard Environmental Law Review: journals.law.harvard.edu/elr/wp-conte...

journals.law.harvard.edu

Daniel Schwarcz @danielschwarcz.bsky.social · Sep 5

7/ Done right, this approach wouldn’t just stabilize insurance markets. It would make coverage a tool for climate adaptation: rewarding resilient building, discouraging risky development, and protecting vulnerable communities

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Daniel Schwarcz @danielschwarcz.bsky.social · Sep 5

6/ I argue we need an “Obamacare for Homeowners Insurance.” That means: (i) Minimum coverage standards (including climate risks like floods), (ii) anti-discrimination rules so insurers price fairly, (iii) State-run exchanges for managed competition, & (iv) Progressive subsidies.

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Daniel Schwarcz @danielschwarcz.bsky.social · Sep 5

5/ The crisis mirrors health insurance before the Affordable Care Act. Back then, broken state markets left millions uninsured. The ACA offered a template: federal standards, state implementation, broad coverage rules, and progressive subsidies.

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Daniel Schwarcz @danielschwarcz.bsky.social · Sep 5

4/ State fixes have failed. Florida blames lawsuits; California doubles down on rate regulation. Both approaches misdiagnose the problem—and both have fueled more instability, not less.

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Daniel Schwarcz @danielschwarcz.bsky.social · Sep 5

3/ Climate change is the main driver. Wildfires, floods, hurricanes, and severe storms are making coverage unaffordable and unavailable. Even states once thought “safe” are now facing double-digit premium hikes and insurer exits.

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Daniel Schwarcz @danielschwarcz.bsky.social · Sep 5

2/ U.S. homeowners insurance is breaking down. Insurers are pulling out, premiums are spiking, and millions are left without reliable coverage. This crisis isn’t just about insurance—it threatens housing markets, financial stability, and climate resilience.

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Daniel Schwarcz @danielschwarcz.bsky.social · Sep 5

1/ Just published in the Harvard Environmental Law Review: “Obamacare for Homeowners Insurance: Fixing America’s Broken Insurance Markets in a Time of Climate Change.” journals.law.harvard.edu/elr/wp-conte...

journals.law.harvard.edu

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Daniel Schwarcz @danielschwarcz.bsky.social · Aug 28

Bottom line: Liability and insurance can’t carry the regulatory load. Effective AI safety governance requires proactive regulation—setting ex ante rules for design, testing, and deployment of AI systems. Check out the full argument here: papers.ssrn.com/sol3/papers....

The Limits of Regulating AI Safety Through Liability and Insurance: Lessons From Cybersecurity

As Artificial Intelligence (AI) systems become increasingly embedded in decision-making, design, and development across public and private sectors, proposals to

papers.ssrn.com

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Daniel Schwarcz @danielschwarcz.bsky.social · Aug 28

If liability insurers cannot advance AI safety through pricing or other strategies, then liability becomes a limited regulatory tool, since most firms are already insured against AI-related risks through general liability coverage and are likely to remain so in the future.

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Daniel Schwarcz @danielschwarcz.bsky.social · Aug 28

This doesn’t mean insurers have no role to play in mitigating narrow AI risks (e.g., performance guarantees) or in helping firms weather broader AI liability. But expecting them to regulate AI safety is a mistake.

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Daniel Schwarcz @danielschwarcz.bsky.social · Aug 28

Without strong ex ante rules, liability insurance won’t promote AI safety. At best, it will pool losses after accidents. At worst, it will distort incentives, encourage secrecy, and lull policymakers into false confidence.

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Daniel Schwarcz @danielschwarcz.bsky.social · Aug 28

AI safety presents even greater challenges for insurers than cybersecurity, due to the scarcity of reliable loss data, the rapid evolution of AI systems, the technical complexity of ensuring safety, and the fact that AI-related risks are embedded throughout business operations.

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Daniel Schwarcz @danielschwarcz.bsky.social · Aug 28

History tells us otherwise. Cyber insurers were once hailed as “private regulators” who would make firms safer from cyber risk. Two decades later, they have struggled to price risk in ways that meaningfully encourage cybersecurity or otherwise advance it.

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Daniel Schwarcz @danielschwarcz.bsky.social · Aug 28

Many argue that if AI firms are liable for harms, insurers will price that risk & push them toward safer practices. Sounds elegant. But there’s a problem… it assumes insurers can measure those risks well enough to incentivize care, or otherwise affirmatively promote AI safety.

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Daniel Schwarcz @danielschwarcz.bsky.social · Aug 28

🚨 New paper alert! Josephine Wolff & I argue that efforts to regulate AI safety through liability and insurance are likely to fail—just as they largely did with cybersecurity. Download The Limits of Regulating AI Safety Through Liability & Insurance: papers.ssrn.com/sol3/papers....

The Limits of Regulating AI Safety Through Liability and Insurance: Lessons From Cybersecurity

As Artificial Intelligence (AI) systems become increasingly embedded in decision-making, design, and development across public and private sectors, proposals to

papers.ssrn.com

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Daniel Schwarcz @danielschwarcz.bsky.social · Aug 7

Had a great time presenting at the Law-Following AI Workshop at Cambridge. Drawing on the track record of cyber insurers, the project argues that liability insurance is likely to limit the effectiveness of liability as an AI regulatory tool. Will share the paper publicly soon!

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