Alternative risk transfer
Alternative risk transfer (ART) refers to non-traditional ways of financing or transferring risk that go beyond standard insurance and reinsurance, such as captives, insurance-linked securities, and parametric structures.
Traditional risk transfer means buying an insurance or reinsurance policy that reimburses actual losses. ART covers the tools that fall outside that model. Common examples include captive insurers owned by the businesses they protect, insurance-linked securities that pass risk to capital-market investors, and parametric contracts that pay a set amount when a measurable trigger is met.
Organizations turn to ART when conventional coverage is costly, limited, or unavailable, or when they want more control over how a risk is financed. These structures can widen the capital available to absorb losses and can be tailored to risks that standard markets find hard to price.
For example, a company facing a hard insurance market might combine a captive with a parametric contract to manage a catastrophe exposure. ART is closely tied to emerging and complex risks, the same space where reinsurers such as RiskCube Re provide capacity to MGAs and carriers.
Definitions are educational and general, and specific contracts, endorsements, and state rules may modify them. For regulatory guidance, refer to the NAIC or the Insurance Information Institute.