Here are the fresh policy initiatives unveiled this week.
In the rapidly evolving landscape of industrial manufacturing, the focus on software development has brought about new risks for companies. These risks, particularly in the context of digital factories, are centred around expanded product liability linked to software, cybersecurity, and complex digital manufacturing ecosystems.
The European Union's new Product Liability Directive (PLD) has played a significant role in this shift. The PLD now explicitly includes software, AI, digital services, and manufacturing files as "products" subject to strict liability. This means that defects in software or failure to maintain cybersecurity updates can result in strict liability for damages caused without fault, and companies cannot contractually limit this liability[1][2].
Key liability risks for digital factories include software defects in embedded or stand-alone software or AI causing harm to users or operations, cybersecurity vulnerabilities or failures in digital security updates considered product defects, and the integration of IT and OT systems, digital twins, and third-party devices, which create a hyperconnected ecosystem where any security breach can lead to physical harm, operational shutdowns, or supply chain disruptions[1][3][4].
In response to these emerging risks, HDI Global, an internationally active insurance group based in Hannover, has introduced a new liability concept for industrial companies. The Smart Protect Tech E&O (Errors & Omissions) policy focuses on tailored coverage for technology-related operational errors and omissions, including software defects and cybersecurity incidents affecting digital manufacturing[2].
The policy accounts for the complex risk landscape in smart factories, providing insurance solutions for losses caused by interconnected systems and digital services. It also supports companies navigating the stricter liability environment under the EU PLD by covering claims arising from software and cybersecurity failures integrated into industrial products and processes[2].
While the new EU Product Liability Directive takes effect in December 2026, and full impacts and insurance market adaptations are still emerging[1][2], HDI Global's Smart Protect Tech E&O policy offers a proactive approach to managing these novel risks. The policy covers IT asset damages within a single contract, offering a comprehensive solution for manufacturers in a highly digital and interconnected production environment[1][2][3].
However, it's important to note that while HDI Global's policy addresses these risks, companies also need comprehensive cybersecurity and operational risk management strategies beyond insurance[3][4]. Traditional industries like electrical engineering, mechanical engineering, logistics, etc., now have staff or entire departments dedicated to software development. These software developments generate significant value in these industries[5].
Michael Sossdorf, a product developer at HDI Global, emphasised the importance of the new policy, stating, "The Smart Protect Tech E&O policy offers specialized coverage to manage these novel risks, helping manufacturers mitigate legal exposure in a highly digital and interconnected production environment."
In summary, as industrial manufacturing evolves with digital factories, liability risks have expanded from physical product defects to encompass software flaws and cybersecurity vulnerabilities due to new legislation and heightened cyber threats. HDI Global's Smart Protect Tech E&O policy offers a specialized solution to manage these risks, helping manufacturers navigate the complex landscape of digital manufacturing and mitigate legal exposure.
Insurance companies, like HDI Global, have recognized the growing significance of technology in industrial manufacturing, particularly in the context of digital factories. As a result, they have introduced specialized insurance policies, such as the Smart Protect Tech E&O, to cover technology-related operational errors and omissions, including software defects and cybersecurity incidents affecting digital manufacturing.
