Sometimes traditional insurance policies don’t always support additional risks. In these instances, using an alternative risk transfer (ART) solution may be more effective. When you enact products within the ART market, companies can purchase coverage and transfer risk without using commercial insurance. If your organization bears any risk not covered by a traditional policy, ART may provide you with additional options for coverage. Here are three alternative risk products that may benefit your business.
1. Finite Risk
Recently, more and more businesses are accepting finite risk products as a way to reduce the cost of capital earnings. These products are long-term solutions that help minimize yearly volatility and are most popular in company mergers or acquisitions.
2. Contingent Captial
Contingent capital products are useful since they generally converge insurance and capital markets. Although they are relatively new to the market, they are growing in popularity because they help bridge gaps between full and self-insurance.
3. Insurance-Linked Securities
Also known as Cat Bonds, these products allow insurers and corporations to transfer any catastrophic risks to the capital markets using bonds. The use of these products is generally accepted, but popularity will likely grow as transactional costs go down.
If your company carries any low-risk profile, then using an alternative risk transfer product may benefit you. While only three products are highlighted here, other solutions may exist that may provide additional coverage beyond what’s available within the standard market.