The alternative risk transfer (ART) market offers solutions when traditional insurance faces challenges like capacity constraints, timeliness/certainty of payment, multiyear or multiline transfer needs, or hedges for risk which are not covered under the usual policies.
The current market conditions are favorable to the ART and solutions are supported by
- Data availability
- Significant pools of investor capital available with little alternatives given the current low interest rates environment
- Innovation and investments on ART at large insurance and reinsurance carriers.
Willis Towers Watson’s Paasch: New Coverage Can Include Talent, Loyalty
ART solutions are very much tailor-made to client needs but can be grouped in 6 categories:
- Integrated or multiline programmes
- Structured solutions (multiyear)
- Parametric covers, which provide an alternative way of transferring the revenue or cost impact of natural and man-made perils
- Weather hedges
- Residual value covers
- Capital solutions including catastrophe bonds