Alternative Risk Transfer Solutions

Alternative Risk Transfer Solutions

Explore how your organization can approach risk finance and risk transfer with a new perspective.

Talk to Our Team

What Are Alternative Risk Transfer Solutions?

Alternative risk transfer (ART) solutions are risk financing and risk transfer approaches that help organizations retain, finance and transfer risk beyond traditional insurance. Common ART approaches include captive insurance (captives and cell company structures), structured and multi-year solutions, parametric insurance, and access to risk capital via insurance-linked securities (ILS) such as catastrophe bonds.

For risk managers, alternative risk transfer solutions can help to address increased retentions, constrained capacity and harder-to-insure or emerging exposures. Providing additional sources of capacity can also help:

  • Improve cost predictability
  • In certain instances, deliver faster liquidity after defined events

How Aon Helps Risk Managers with Alternative Risk Transfer

Aon helps corporate risk managers evaluate, structure and place alternative risk transfer solutions to support resilient, data-driven risk strategies. Depending on your objectives, this can help you:

  • Quantify retained risk: Clarify exposures, volatility and balance-sheet impact using data and analytics.
  • Choose the right structure: Evaluate captives, parametric insurance, multi-year structured solutions or insurance-linked securities (ILS).
  • Support post-event liquidity: Use parametric triggers designed around pre-agreed recovery and cash-flow needs.

Common Alternative Risk Transfer Use Cases

Risk managers often consider alternative risk transfer when they need to address one or more of the following situations:

  • Higher retention and budget pressure: Improve cost predictability through the use of captives and structured/multi-year solutions.
  • Peak, modeled or emerging exposures: Add parametric capacity or ILS/cat bonds alongside traditional markets to address harder-to-insure risks.
  • Need for faster post-event liquidity: Use parametric triggers designed to provide faster access to funds after a qualifying event.
  • Captive strategy: Use your captive to develop risk financing strategies that efficiently balance risk retention and risk transfer.
  • Legacy and run-off challenges: Reduce uncertainty and volatility using retrospective and run-off solutions such as loss portfolio transfers (LPTs).

Key Features of Alternative Risk Transfer

Flexibility and Innovation
Develop solutions for emerging or difficult-to-place risks (for example, certain climate-driven exposures or complex cyber scenarios) by combining data, analytics and alternative sources of capacity such as captives, parametric insurance and structured solutions.

Risk Portfolio Diversification
Reduce reliance on a single method of risk transfer by using a portfolio of alternative risk transfer structures. This can help improve resilience and manage volatility across the program and budget cycle.

Access to Additional Sources of Risk Capital
Access additional sources of risk capital by transferring defined risks to capital markets investors through insurance-linked securities (ILS), including catastrophe bonds. These instruments can complement traditional (re)insurance capacity and may broaden overall capital available to support your risks.

Cost and Volatility Management
Improve cash flow and manage earnings volatility by spreading exposures over time through structured and multi‑year solutions. Parametric structures and catastrophe bonds can also support faster access to liquidity following qualifying events, subject to agreed triggers and terms.

Frequently Asked Questions

  • What is alternative risk transfer?

    Alternative risk transfer (ART) refers to risk financing and risk transfer approaches that can sit alongside, or in place of, traditional insurance. It can include captive insurance, parametric insurance, structured and multi-year programs, catastrophe bonds and other insurance-linked securities (ILS).

  • When should a risk manager consider alternative risk transfer solutions?

    Risk managers often explore ART when market capacity tightens, pricing becomes volatile, retentions increase, or when emerging exposures are difficult to insure conventionally. It can also be relevant when an organization wants:

    • More certain budget outcomes;
    • Additional sources of risk capital;
    • Faster access to liquidity after specific events.
  • How does parametric insurance differ from traditional insurance?

    Traditional insurance typically pays out based on assessed loss after a claims process. Parametric insurance pays a predefined amount (a payout) when an objective trigger is met (for example, wind speed, earthquake magnitude or rainfall levels). That trigger-based design can help simplify settlement and support faster cash flow after a qualifying event.

  • What is the difference between a captive and a cell company?

    A captive is an insurance vehicle owned (wholly or partially) by the organization using it to retain and finance risk. A cell (or segregated cell) structure can provide similar benefits, but within a shared platform where assets and liabilities are separated by “cells.” The right approach depends on governance preferences, capitalization, timeline and the types of risk you want to retain.

  • What are insurance-linked securities (ILS) and catastrophe bonds?

    Insurance-linked securities (ILS) are instruments that transfer insurance risk to capital markets investors. Catastrophe bonds are a common type of ILS structure in which investors receive a return for taking defined catastrophe risk; if a qualifying event occurs under the agreed terms, the bond proceeds can be used to fund the client’s recovery.

  • What are structured solutions?

    Structured risk finance solutions provide bespoke capacity by combining risk financing and risk transfer features—often with multi-year terms. They can incorporate risk sharing to enhance risk/reward and may be designed as single- or multi-line solutions, written as direct insurance or reinsurance (including through a captive), and structured on a prospective or retrospective basis (for example through loss portfolio transfers).

The information contained on this page and the rest of this website is subject to the terms and conditions found here.

Related Insights

Alternative Risk Transfer Solutions

Let’s Connect

Talk to Our Alternative Risk Transfer Team

Contact us to discuss alternative risk transfer solutions.

Contact Us