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Creative program design: ART solutions for commercial real estate

Commercial real estate companies face many property and liability risks. Learn more about tailored risk financing mechanisms that reduce the cost of risk.

04/09/2025 · 6 minute read

Marsh ART Solution Metrics

Marsh's exclusive Marsh ART solution is a cutting-edge insurance product that may offer US-based property insurance buyers access to alternative capital markets. With Marsh ART, organizations may be able to secure comprehensive coverage with the goal of reducing or eliminating non-concurrencies, transferring risk more efficiently, achieving long-term program stability, and diversifying their insurance portfolio to better manage their financial and risk management goals.

165+ alternative risk programs placed

$ 1.5 BILLION in global ART premiums

Improved risk management strategy

Potential savings of up to 75% in Primary Layers

Commercial real estate (CRE) companies continue to face a multitude of property and liability risks, and securing traditional coverage for them may be prohibitively expensive. Amid rising insurance costs and increasingly restrictive coverage terms, CRE leaders are looking for more flexible and tailored risk financing mechanisms that will reduce the cost of risk.

A confluence of factors impacting the insurance market

From insurance companies and buyers to lenders and borrowers, many stakeholders are still experiencing the effects of one of the most difficult property markets in decades. Despite some recent easing, the property market continues to be influenced by a number of factors, including inflation of property values, more frequent natural disasters increasing the likelihood of property damage and loss of income, and shrinking capacity as insurers reduce their appetite for regions and occupancies prone to loss.

Simultaneously, the casualty market is suffering from incremental increased claim settlements, coverage challenges, as well as unprecedented nuclear verdicts, which in turn is limiting the appetite of general liability, umbrella, and automobile carriers. Guaranteed cost structures are difficult to come by, and excess limits rates are increasing at a rapid pace.

While CRE companies may hope to minimize insurance expenses by retaining more risk on their own balance sheets, this practice is often at odds with lender requirements. Banks and other financial institutions may impose limits on the amount of liability that these companies can retain, which are frequently set at relatively low levels. The fluidity of real estate portfolios paired with the increased prevalence of long-tail casualty losses may lead to additional financial complexity for loss-sensitive structures. 

Simplified and specialized risk transfer for CRE companies

As the name suggests, alternative risk transfer, or ART, is an alternative way to look at insurance. It encompasses an array of risk transfer, financing, and retention methods that do not fit the conventional property and casualty insurance model.

ART solutions can help companies stabilize their insurance costs and reduce their exposure to fluctuations in the traditional insurance market. Via customized risk financing mechanisms that operate outside of traditional insurance, such as capital markets, reinsurers, or specialized ART insurance providers, CRE companies gain access to a specialized approach to risk transfer that understands their industry and business on an individual level.

The strategic advantage of ART 

ART solutions are increasingly beneficial and attractive to CRE companies, potentially offering several key advantages over traditional insurance, including:

  • Customization and flexibility: ART solutions may enable organizations to tailor their risk financing mechanisms to their own risk management objectives, risk tolerance, and circumstances, allowing for the possibility of more personalization, as well as potentially reducing gaps in coverage. 
  • Diversified risk exposure: Leveraging ART solutions allows businesses options that may diversify their risk exposure beyond the offerings of traditional insurance, meaning organizations can spread their risks across different coverage lines and potentially mitigate the impact of significant claims events.
  • Control: By establishing their own insurance entities, known as captives, CRE companies may gain greater control over their claims management. With captives, companies may be able to implement more targeted risk management strategies, establish and oversee the claims handling process, and streamline communication with claimants, potentially leading to more proactive and efficient claim resolution.
  • Stability and cost-savings: By insulating companies from adverse market conditions like rate increases, inflation, and capacity reductions, ART solutions may provide greater stability in coverage terms and costs, including the potential for improved premium cost efficiencies compared to a traditional insurance renewal.

Additional capacity access: ART solutions may provide access to additional risk transfer capacity beyond what is available in the traditional insurance market. For example, ART solutions may enable CRE companies to obtain coverage in layers of an insurance program, sitting lower on a program tower than standard insurers would allow.

As organizations go about evaluating their risk management objectives and risk tolerance, it is important to remember that a combination of ART solutions and traditional insurance coverage may help ensure a strong and balanced portfolio.

Three commonly applied ART solutions for CRE companies

While there is no one-size-fits-all approach to ART and within each solution there is room for customization and creativity, the following risk financing mechanisms are particularly useful and widely used in the CRE world. 

Structured programs

Blending risk financing and risk transfer, structured programs may provide more stable terms, rates, and attachments over a multi-year period. Businesses accept greater ultimate program cost volatility than traditional insurance in exchange for a lower premium and potentially lower overall spends.

Structured programs provide more budget certainty, due to known premium spend and downside risk in each period. They offer an opportunity to increase self-insurance participation, with a known downside protection in the event of adverse loss experience. These programs are typically non-cancelable by the carrier or client. 

Another benefit with structured programs is the policyholder can potentially receive a portion of their premium back following a favorable client loss experience, or when incurred losses are lower than expected, versus the traditional insurance approach where the policyholder pays a nonrefundable fixed premium each year. 

Aggregate stop loss programs

Similar to structured programs, aggregate stop loss programs, sometimes referred to as plus aggregate programs, allow organizations a possibility of taking on a greater amount of retention over a multi-year policy period, in return for potential cost savings on premiums. 

These programs may provide protection against significant financial losses resulting from high claims that could exceed their current financial capabilities.

Fronting

CRE companies may also opt to use fronting to access larger insurance limits and capacities than what may be available through traditional insurance programs. A fronting arrangement entails a licensed insurance carrier (the fronting company) providing coverage to another entity, one that cannot write coverage, where the insured retains the risk via a deductible and indemnity or by transferring it to a captive insurer through a reinsurance agreement. Fronting policies may offer coverage in high excess layers with higher capacity, potentially providing coverage across all layers of an insurance tower, from primary coverage to excess layers. 

Determine if ART is right for your real estate needs

ART solutions offer a welcome opportunity for CRE companies to get creative with their risk financing strategies and find more flexible and suitable coverage for historically non-insurable or difficult-to-insure risks. If ART is right for your organization, the payoff could include time and financial savings, as well as greater control and a stronger risk management strategy overall.

To decide if ART is right for your organization, it’s important to consult knowledgeable insurance advisors who have experience in dealing with non-traditional capital sources. These advisors can assess your specific needs and risks and help you evaluate if ART solutions align with your risk tolerance objectives. 

Marsh’s Alternative Risk Transfer Group (ARTG) is uniquely positioned to help organizations like yours understand the suitability and value of innovative risk financing solutions, depending on your business’s objectives and risk profile. 

To learn more, speak with a representative from Marsh’s ARTG

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