Alternative Risk Transfer

Plagued by persistent pricing increases and diminishing capacity for certain industries or risks that may not align with insurers’ current underwriting appetite, the Insurance market has become, and continues to be very challenging. Extreme weather patterns and climate change continue to disrupt the insurance market making it more expensive and/or difficult for companies to obtain appropriate insurance cover against natural catastrophic perils.

With the rise in insurance costs, retention levels continue to grow and cover has become more restrictive forcing insurance companies to become more proactive in exploring alternative ways of managing, financing, and transfer of risks outside of the realms and restrictions of traditional insurance. Thus, as they are no longer confined to terms and conditions attached to traditional insurance, insurance companies are now seeking ways of effectively transferring and financing risks that have previously not been traditionally insurable.

What are Alternative Risk Transfer (ART) solutions?

These are essentially substitute risk management and finance strategies to the traditional direct insurance practices. ART is a re-classed, repackaged approach to finding solutions for some of the key issues and challenges faced by traditional insurance arrangements.

Three key motivators driving organizations to explore ART solutions:

1. Cost efficiency:Over time, ART solutions can cost less than what the traditional insurance market would offer on a like-for-like basis.
2. Supplementing traditional insurance: ART solutions create alternative access points for additional or new capacity and /or higher limits previously not available.
3. Bridging the protection gap:ART solutions create opportunities and possibilities for exploring protection options for previously uninsurable risks.