Specialty and emerging risk

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.

Captive reinsurance

Captive reinsurance is an arrangement in which a captive insurer, an insurance company created and owned by a parent business or group to insure that group's own risks, participates as a reinsurer, often by assuming risk ceded from a licensed fronting insurer.

Cyber reinsurance

Cyber reinsurance transfers a portion of an insurer's cyber insurance risk, such as losses from data breaches, ransomware, and business interruption caused by cyber events, from the primary insurer to a reinsurer.

Insurance-linked securities (ILS)

Insurance-linked securities (ILS) are financial instruments that transfer insurance risk to capital-market investors. The best-known example is the catastrophe bond, which pays insurers if a defined disaster occurs.

Parametric reinsurance

Parametric reinsurance pays a predefined amount when an objective, measurable trigger is met, such as a hurricane of a set wind speed or an earthquake above a chosen magnitude, rather than reimbursing the ceding company's actual losses.

Protected cell captive

A protected cell captive is a captive insurance structure divided into legally separate cells, so each participant's assets and liabilities are ring-fenced from the others.

Retrocession

Retrocession is reinsurance purchased by a reinsurer. When a reinsurer transfers part of the risk it has assumed to another reinsurer, the transaction is a retrocession and the party accepting that risk is a retrocessionaire.

Specialty reinsurance

Specialty reinsurance is reinsurance for niche, complex, or non-standard lines of business that require dedicated underwriting expertise, such as aviation, marine, energy, political risk, and cyber, along with other emerging exposures.