Insurance Marketplace Realities 2025 – Alternative risk transfer (ART)
October 4, 2024
Alternative risk transfer options are in high demand, especially for clients with challenging risk profiles, poor loss experience or who seek to disrupt placements.
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Rate predictions: Alternative risk transfer (ART)
Trend
Range
Structured programs
Flat
Parametric nat-CAT
Flat
Parametric non-CAT
Flat
Portfolio programs
Limited carrier appetite
Captive stop loss
Flat
Structured solutions
These multiyear and increasingly multiline programs blend risk financing and risk transfer into a single policy that is suitable for distressed layers of any line of business. That distress could be a result of adverse claims where insurers seek to raise attachments and/or reduce capacity, or where there is a large gap in risk perception between the insured and the insurer. Today, these are commonplace in primary property, auto buffer layers, errors & omission, cyber or as an “in-fill” where insurers have imposed large corridor retentions.
Deployed where premium to policy limit ratios exceed 40% annually and increasingly with a range of features, such as swing premium options, corridors and risk financing on a funds-withheld basis
Increasing multiline deployment as reinsurance of captive insurance companies
Outlook for key lines of business
Property: As the traditional property market continues to stabilize, we expect the reason for use to pivot from a challenge to traditional market price increases, to a platform to facilitate favorable client outcomes through return premiums if claims are favorable or for long-term cashflow certainty if claims deteriorate.
Casualty/auto: Auto risk, especially for those with large fleets, will continue to mandate the use of multiyear structured buffer solutions as insurers force higher attachments, impose corridor retentions and other restrictions.
Parametric solutions
The adoption rate in the parametric sector continues to increase as insureds see firsthand that the product simply works. Parametric solutions are being used to disrupt or enhance natural catastrophe risk protection in property programs, protect uninsured assets and supply chains, and facilitate investment in a resilient future. The focus is on natural catastrophes and weather risks, but also pandemics and elements of cyber risk. Indeed, WTW is also often deploying these programs to support lender financing and for government-led climate, environmental and social resilience initiatives.
Capacity, both annual and multiyear, continues to increase as more (re)insurers and investors launch new products or support specialist MGA/MGUs.
In North America, earthquakes and hurricanes are the most frequently traded perils with increasing interest in wildfire, hail, tornado and general weather perils, such as rainfall and temperature/heat stress.
Insurers are increasingly catering to all sizes of client as well as creating pro-client differentiating programs.
Wider client adoption continues following years of education and loss events that prove the effectiveness of the approach.
Other areas of insured interest
Collateral-free fronting for highly creditworthy companies
Multiline structured reinsurance for maturing captive insurance companies
Portfolio/integrated risk programs
Capital market-led solutions
Disclaimer
Willis Towers Watson hopes you found the general information provided in this publication informative and helpful. The information contained herein is not intended to constitute legal or other professional advice and should not be relied upon in lieu of consultation with your own legal advisors. In the event you would like more information regarding your insurance coverage, please do not hesitate to reach out to us. In North America, Willis Towers Watson offers insurance products through licensed entities, including Willis Towers Watson Northeast, Inc. (in the United States) and Willis Canada Inc. (in Canada).
