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Alternative Risk Transfer

ART solutions can provide coverage for risks that are conventionally hard to place and enhance an organization’s risk management capabilities.

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Customization

Enables organizations to create programs precisely aligned with their unique risk profiles, reducing potential coverage gaps.

Stability

Insulates firms from adverse market conditions, including rate increases, inflation, capacity reductions, and changes in terms and conditions.

Budgeting certainty

Provides known premium spend over the long-term, enabling organizations to forecast their insurance costs beyond the next year.

As the cost of insurance rises, retention levels grow, and coverage terms become more restrictive, organizations are proactively seeking new opportunities to manage, transfer, and finance risks effectively.

While traditional insurance policies transfer risk to commercial insurance companies in exchange for premium payments, alternative risk transfer (ART) solutions leverage innovative, customized strategies and financial instruments available outside of traditional insurance companies, such as capital markets, reinsurers, and specialized ART insurance providers.

ART solutions can address risks that are expensive, provide coverage for risks that are conventionally hard to place, and enhance an organization’s overall risk management capabilities. Tailored to businesses’ unique risk profiles, ART solutions can help organizations fulfill their insurance needs with greater efficiency and stability, as well as provide a clearer view into their long-term premium cost.

How Marsh can help

We offer highly customizable options for managing and financing risk. Our capabilities include, but are not limited to, the following:

  • Structured risk programs: Solutions that blend risk financing and risk transfer by taking advantage of a firm’s ability to share risk on a limited basis, to generate efficiencies not available through traditional programs.
  • Integrated risk programs: Multi-year, multi-coverage products that deliver fixed price stability, potential premium savings through portfolio effect, and streamlined insurer costs. Second-loss integrated programs are also available, which can maximize a business’s risk bearing capacity.
  • Performance warranty/efficacy insurance: A risk finance product for new and alternative energy source technologies that are not proven for market. This solution may be critical for meeting lender financing requirements for start-up projects.
  • Fronting capabilities: With this product, organizations can access larger insurance limits and capacities than what may be available through traditional insurance programs. Fronting policies can offer coverage in high excess layers with higher capacity, potentially covering the entire insurance tower.
  • Captive insurance/reinsurance programs: Companies establish their own insurance subsidiaries, known as captives, to self-insure certain risks. Captives can provide more flexibility and cost savings compared to traditional insurance. ART programs can reinsure a captive, serving as a backstop in the event of unforeseen losses.
  • Aggregate stop-loss programs: In these programs, insureds take on a greater amount of retention over a multi-year policy period in exchange for potentially significant premium cost savings.
  • Loss portfolio transfer: A financial transaction where a portfolio of insurance policies’ liabilities is transferred to an insurer, allowing for better financial stability and reduced risk exposure.
  • Parametric: These financial instruments allow companies to hedge against weather-related risks, such as temperature or rainfall variations. They can be used by industries heavily influenced by weather conditions, such as agriculture or energy.
  • Insurance-linked securities: Financial instruments such as catastrophe bonds or insurance-linked notes that allow investors to assume insurance risks. In the event of a specified loss, the investors' principal may be used to pay claims.
  • Risk pooling: Insurance companies may form pools to share risks collectively. This setup allows for the aggregation of risks and the sharing of losses among participating insurers.

How ART solutions deliver value

It is important for organizations to carefully assess their risk management objectives, risk tolerance, and the suitability of ART solutions for their specific circumstances. Depending on an organization’s unique needs, ART solutions can deliver value in the following ways:

By diversifying their risk exposure beyond traditional insurance solutions, businesses can spread their risks across different entities and financial instruments to potentially mitigate the impact of catastrophic events.

Compared to a traditional insurance renewal, ART solutions can be more cost-effective. For example, structured insurance allows organizations to take on additional risk in exchange for potential premium savings, in the event of a favorable loss experience.

By utilizing multi-year contracts, ART solutions can provide more stable cost and coverage terms. These contracts help insulate organizations from changes in the market, including rate increases, inflation, capacity reductions, and evolving terms and conditions.

Customized solutions can be crafted to address specific risks that may be conventionally difficult to insure, offering businesses more comprehensive protection and reducing potential coverage gaps.

ART solutions can provide access to additional risk transfer capacity beyond what is available in the traditional insurance market. This extra capacity can be particularly valuable for firms with large or complex risks that may exceed the capacity availability of traditional insurers. For example, ART solutions may enable businesses to obtain coverage in layers of an insurance program, sitting lower on a program tower than standard insurers would allow. 

Why Marsh

Marsh has decades of experience designing ART solutions and developing strong relationships with a variety of non-traditional capital sources with strong appetites for financing corporate risk. Using analytics, we conduct risk modeling to better understand the risk profile of our clients and help them build customized insurance programs. We collaborate with markets within the ART marketplace to generate solutions of varying complexity to address our clients’ risk appetites.

We oversee 145 ART programs, representing half of the entire market in this space. With a gross written premium of more than US$1 billion, we not only have the experience but the expertise to help you navigate innovative risk solutions and find the best fit for your organization. 

Our people

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Aiden Joo

Managing Director, Head of ART North America

  • United States

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Kai Ishii

Senior Vice President, Alternative Risk Transfer Leader

  • United States