Aipedia: Insolvency practitioners

AI-drafted director conduct reports

Aipedia, by the Apex broking team · Last reviewed 2026-10-27

AI can help draft director conduct reports to the Insolvency Service, but every statement must be accurate, fair and traceable to the IP's records. An overstated or wrong allegation can lead to complaints, claims and reputational harm.

Part of: AI in Insolvency practitioners

In short

Office holders report on directors' conduct to the Insolvency Service, and AI can assemble those reports from investigation findings. The risk is that a generative tool hardens tentative findings into firm allegations, or leaves out misconduct the evidence showed. The Insolvency Code of Ethics requires the IP to judge whether AI output is appropriate (R321.1), to guard against automation bias and to keep records a third party could assess (R130.2). PI may respond to a director's claim, depending on the wording, and defamation and regulatory cover vary.

How AI is used to draft conduct reports

Office holders in corporate insolvencies report to the Insolvency Service on the conduct of the company's directors. The report draws together what the investigation found: trading while insolvent, preferences, unpaid Crown debts, missing records and the like. Because the material often comes from the same digitised records and bank analysis used for SIP 2 investigations, firms may use AI to assemble the narrative and populate the report.

A generative AI tool can summarise findings and draft wording quickly. It can also state things more firmly than the evidence supports.

The duties that apply

A conduct report can contribute to a decision about a director's future, so accuracy and fairness matter. Under the Insolvency Code of Ethics:

R321.1: the IP must determine whether AI output is appropriate for the purpose. A report to a regulator is a high-stakes purpose.
117.3 A2: automation bias. A polished draft can carry an unsupported allegation through review.
R1.10 and R103.2: the IP is responsible for the team's drafting and must supervise it.
130.1 A1 and R130.2: every statement should be traceable to written contemporaneous records that a reasonable and informed third party could assess.
R104.3 and R104.4: confidentiality when director and company information goes into a tool.

Objectivity is a fundamental principle of the Code. A report that overstates misconduct because the tool framed it that way is a problem whether or not anyone intended it.

What can go wrong

Illustrative scenario: a case administrator asks an AI tool to draft the conduct section from investigation notes. The notes record that a director "may have" taken payments after the company stopped paying HMRC; the tool turns this into a statement that the director preferred themselves over the Crown. The IP signs the report without checking the underlying analysis, which in fact showed the payments were salary under an existing contract. The director learns of the allegation, challenges it, and complains to the RPB.

Exposure can arise in several ways:

a complaint and RPB investigation into the IP's conduct;
a director alleging the report was negligent or defamatory and claiming for loss;
reputational damage to the firm if the error becomes public;
the opposite problem: a softened or incomplete report that omits misconduct the evidence showed.

In each case, the quality of contemporaneous records largely determines how defensible the IP's position is.

How PI usually responds

PI is designed for third-party claims arising from professional work, and a director's claim over an inaccurate report may fall within it, depending on the wording and how the claim is framed. Some policies include defamation cover; others do not. Regulatory defence costs for an RPB investigation are covered by some wordings but not all. The IPA PII guidance sets compulsory cover but says nothing about AI, and R3 records that some practitioners are unsure whether their PI would cover AI errors.

A director's challenge is often the first sign of a claim. Check your policy's notification requirements; see notification as a condition precedent.

Practical controls

Use AI to organise evidence, but have the IP or a senior manager write or rewrite the conclusions.
Footnote or cross-reference every allegation to the source document on file.
Check the strength of language: "may have", "appears to" and "did" mean different things.
Do not upload director personal data to tools outside the firm's approved list; see data confidentiality.
Keep the draft history so you can show how the final report was reached.

How Apex helps

Apex arranges PI for insolvency practitioners. A broker can check whether your policy covers director claims, defamation and regulatory defence costs. See our PI guide for IPs and the insolvency practitioners hub.

Sources

Frequently asked

Can I use AI to draft a director conduct report?

You can use AI to help organise evidence and draft, but the IP must decide whether the output is appropriate for the purpose under R321.1 and must be able to support each statement with contemporaneous records. Conclusions about a director's conduct need human judgement.

What if an AI-drafted report overstates a director's misconduct?

The director may complain to the RPB or bring a claim, and the IP is responsible for the content. Correcting the report promptly, keeping a record of what happened and telling your broker if a claim looks possible are sensible first steps.

Does PI cover defamation claims from directors?

It depends on the wording. Some PI policies include defamation within the insuring clause and others exclude or limit it. Ask your broker to confirm before relying on it.

Check your PI covers how you use AI

Tell us about your firm and the work you do. A broker will review how your current PI treats AI-assisted work, or arrange new cover. No fee for a quote. Or call 0117 325 0027.

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Apex Insurance Brokers Limited is authorised and regulated by the Financial Conduct Authority. Registered in England and Wales, company number 07014570. This page is general information about how AI is used in the profession and how insurance may respond. It is not legal, regulatory or insurance advice on your circumstances, and it does not guarantee that cover will be available or on what terms.