From Volatility to Value: Multi-Year Casualty Insurance and Structured Risk Solutions

From Volatility to Value: Multi-Year Casualty Insurance and Structured Risk Solutions
December 19, 2025 9 mins

From Volatility to Value: Multi-Year Casualty Insurance and Structured Risk Solutions

From Volatility to Value: Casualty Insurance and Multi-Year Structured Risk Solutions

In today’s volatile casualty market, businesses face mounting uncertainty from rising loss exposures and shifting risk transfer dynamics. Multi-year structured programs and other alternative risk transfer solutions can offer a smarter way to align risk duration with capital strategies.

Key Takeaways
  1. Higher pricing and attachment points are pushing more risk and volatility to insureds, demanding stronger risk management strategies.
  2. The emergence of a new “volatility layer” between attritional and catastrophic risk is reshaping program design, requiring innovative solutions such as multi-year structured programs.
  3. Advanced analytics and multi-year programs empower organizations to make data-driven retention versus transfer decisions, optimize capital and reduce pricing uncertainty.

The casualty insurance market is grappling with increasingly acute volatility. Rising claims costs, unpredictable jury verdicts and persistent inflation are making risk management more complex than ever. While North America has felt the sharpest impact, these pressures are starting to spread globally — highlighting the need for innovative risk financing.

The numbers tell the story:

  • Over the past decade, both the frequency and severity of losses have surged.
  • U.S. jury awards have doubled, with median top verdicts climbing from around $50 million in 2019 to $100 million in 2024, according to Aon’s Q2 2025 National Casualty Market Update.
  • Insurers have responded by tightening terms, increasing premiums and raising risk transfer attachment points.

Capacity constraints add to the challenge: Lead umbrella limits that once stood at $25 million now average $5 million or less. In Q2 2025, 81% of umbrella and excess placements saw rate hikes at renewal. Programs have grown more fragmented, often requiring multiple carriers to build a single tower — making it difficult for buyers to discern pricing fairness or coverage clarity.

Why Traditional Models Fall Short

Many organizations are rethinking conventional insurance. Captives and higher retentions are now commonplace,1 reflecting a drive toward greater control over risk financing. Yet, retaining more risk introduces new complexities:

  • Balance Sheet Impact: Large retained losses can hit earnings and capital.
  • Market Relationships: Disengaging from insurers may limit future access to capacity and expertise.
  • Operational Burden: Self-insurance demands robust claims handling and advanced risk management capabilities.

Simply raising retentions or relying on traditional insurance is no longer enough. The goal has shifted from short-term savings to achieving sustained control in an environment defined by volatility. This is where alternative risk transfer (ART) solutions come into play — enabling organizations to finance risk more strategically, smooth pricing swings and align coverage with long-term capital objectives.

The Volatility Layer: An Emerging Retained Casualty Exposure

Traditionally, casualty risk and strategies to finance the exposure could be considered between two zones: an attritional layer (for frequent, low-severity losses, which are typically retained) and a catastrophic layer (for rare, high-severity losses, often transferred to insurers). Current market conditions threaten this concept, where now “risk trifurcation” is reshaping casualty programs, with a new “volatility layer” emerging between attritional and catastrophic risk.

For the volatility layer, these exposures can be too costly to insure conventionally, yet too significant to shoulder alone. This shift forces businesses to make tough choices: retain the risk, pay steep premiums or adopt alternatives — as traditional coverage structures are no longer sufficient to address this middle zone of risk.

Quote icon

The volatility layer is where tough decisions are made and multi-year structured solutions become especially valuable. They can help smooth volatility, build capital and allow businesses to gradually assume more risk over time as a bridge to a more sustainable future.

Michael Gruetzmacher
Head of Alternative Risk Transfer, North America

What is Multi-Year Structured Insurance and Aon’s BufferPro Solution?

Multi-year casualty insurance (Aon’s BufferPro solution) is a structured insurance program that locks in pricing and coverage over several years while incorporating loss-sensitive features such as corridors, return premiums and aggregate protection to reduce volatility and optimize capital, all designed to help clients navigate current market conditions.

How Multi-Year Casualty Programs can be Structured
  1. Glidepath strategies are designed to transition towards higher retention gradually, avoiding the financial shock and operational risk of abrupt change. Instead of jumping from a low deductible to a large retention in one renewal cycle, companies can phase adjustments over two to three years. This approach often involves corridor deductibles, second-event covers, or buffer layers to cap exposure during the transition. Glidepath strategies also align with multi-year ART solutions, offering a bridge from traditional insurance to a more sustainable, retention-based model without sacrificing resilience.
  2. Structured solutions are specialized ART techniques that blend multi-year terms with loss-sensitive features, combining risk transfer and retention in innovative ways. Positioned between retained layers and excess catastrophe protection, they help mitigate volatility versus self-insurance and reduce costs versus traditional insurance. Typical structures include three-year programs with features such as corridors, return premiums, additional premiums and no-claim bonuses. The benefits are compelling: smoothing pricing swings, delivering significant cost savings when losses are low, and providing flexibility and stability for long-term resilience. Common applications include auto liability and general liability programs.
  3. Multi-year agreements are gaining traction as a way to counter annual market volatility, offering bespoke programs that span two to five years and incorporating loss-sensitive features such as corridors, return premiums and no-claim bonuses.
  4. Aon’s BufferPro exemplifies this approach for auto and general liability, delivering cost certainty and potential savings — up to 70% over three years if losses stay low — while providing aggregate protection and pre-loss funding. By locking in terms and sharing risk over multiple years, businesses gain stability, flexibility and a glidepath from traditional insurance to greater retention without sacrificing resilience.
Aon’s BufferPro in Action
  • Turning Premiums into Opportunity

    Due to adverse market conditions and historical loss activity, an insured cost for a $10 million umbrella policy approached $6 million per year with additional premium increases expected at subsequent annual renewals.

    By adopting a three-year Aon BufferPro solution, the same spend now funds a program that rewards performance. If losses remain moderate, up to half of the premium flows back to the insured, creating a $9 million risk fund over three years instead of $18 million gone forever — all while keeping $10 million coverage intact.

  • Auto Liability — Commercial Landscaping Client

    A large commercial landscaping company with a significant fleet faced soaring casualty premiums and volatility. Using BufferPro, Aon’s casualty-focused, multi-year structured risk financing solution, it locked in a three-year structure for a $5 million layer, cutting upfront costs by 22% and securing up to 65% premium recovery if losses remain low. Features like return premium and aggregate protection delivered cost certainty and flexibility, turning an unpredictable spend into a strategic advantage.

  • General Liability — Large Fleet Operator

    A national fleet operator turned to BufferPro to tackle rising costs and volatility in its casualty program. The solution provided a $5 million per occurrence, $20 million aggregate layer over three years, with annual premiums of $3 million. Features such as return premium (up to $5 million) and post-loss financing premium (up to $3 million, but conditional on losses actually occurring) rewarded favorable loss experience while maintaining protection against adverse outcomes.

    This multi-year structure delivered cost certainty, incentivized strong risk management and enhanced resilience — creating a more strategic, capital-efficient approach compared to traditional insurance and self-insurance options.

Doing the Math: Quantifying Risk and Optimizing Capital

Structured solutions offer flexibility and resilience, but their true value lies in the numbers. Before committing to multi-year programs or higher retentions, organizations must quantify the financial impact to ensure decisions align with capital strategies and deliver measurable savings.

Advanced analytics tools such as Aon’s Casualty Risk Analyzer and Risk Financing Analytics model the cost implications of different retention levels, multi-year structures and ART solutions. Monte Carlo simulations, for example, forecast total cost of risk under various scenarios, helping businesses determine whether raising deductibles or adopting a multi-year structure will actually reduce costs over time.

“The next step is turning strategy into numbers,” says Christopher Bruce, Aon’s Chief Broking Officer, National Casualty, North America. “By modeling scenarios and benchmarking against peers, businesses can validate whether ART solutions truly outperform traditional insurance — and identify the optimal mix of retention and transfer.”

Benchmarking is equally critical. If most comparable firms retain $1 million and you’re buying down to $100,000, you may be over-insured. Analyzing insurer economics — understanding how much of your premium covers expected losses versus overhead and profit — can uncover opportunities to deploy capital more effectively through captives or structured solutions.

“Organizations that quantify their risk, benchmark their programs and model alternatives are better equipped to negotiate with insurers, optimize capital and build long-term resilience — even in a turbulent market,” Bruce adds. “Once organizations understand the economics of retention and transfer, the next step is execution — turning insights into action.”

Benefits of Multi-Year Casualty Insurance for CFOs and Risk Leaders

Understanding the economics of risk is only the first step; the real advantage lies in applying those insights. By combining analytics with innovative solutions, businesses can transform volatility into opportunity and strengthen resilience for the long term. Here’s how you can move from analysis to execution:

4 Pillars of Smarter Risk Management

  • 01
    “Do the Math”

    Use advanced analytics tools like Casualty Risk Analyzer and Risk Financing Analytics to model loss trends, retention scenarios and total cost of risk. Data-driven insights are the foundation for smarter decisions.

  • 02
    Buy Smart, Retain Strategically

    Evaluate market offerings tactically. Purchase insurance when it delivers clear value; retain risk when it does not. Align decisions with capital efficiency, not tradition.

  • 03
    Leverage Innovative ART Solutions

    Explore multi-year structured programs such as BufferPro to smooth volatility, close protection gaps, build capital and support a phased approach to higher retention.

  • 04
    Elevate Risk to the Boardroom

    Make casualty risk management a leadership priority. Engage senior leaders in discussions on insurer economics, sustainable financing and resilience strategies that protect both balance sheet and reputation.

Strategic risk management, innovation and resilience are critical in today’s volatile casualty market. Leaders should view risk as a source of value — embedding data-driven insights into every decision to strengthen long-term performance. For tailored strategies that deliver stability and flexibility, connect with Aon’s ART team.

Aon’s Thought Leaders
  • Michael Gruetzmacher
    Head of Alternative Risk Transfer, North America
  • Christopher Bruce
    Chief Broking Officer, National Casualty, North America

1 Global captive numbers soar to 8,000 in 2024, Captive Insurance Times

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This document is not intended to address any specific situation or to provide legal, regulatory, financial, or other advice. While care has been taken in the production of this document, Aon does not warrant, represent or guarantee the accuracy, adequacy, completeness or fitness for any purpose of the document or any part of it and can accept no liability for any loss incurred in any way by any person who may rely on it. Any recipient shall be responsible for the use to which it puts this document. This document has been compiled using information available to us up to its date of publication and is subject to any qualifications made in the document.

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