Alternative Risk Transfer Agreement

2. Dezember 2020

Most of these techniques allow investors in the capital markets to play a more direct role in providing insurance and reinsurance coverage and, as such, the broad scope of alternative risk transfer must lead to a convergence of insurance and financial markets. In addition, a number of approaches involve financing risk transfer, often within traditional reinsurance market structures. Captive insurance companies are set up by companies and reinsurers to obtain premiums that are generally held and invested as a „financed“ insurance class for the parent company. Some prisoners buy excess reinsurance and offer coverage to third parties, sometimes to use their skills, sometimes for tax reasons. Financial reinsurance in various forms (well, surplus relief, capitalization, etc.) consists of different approaches to reinsurance that, relative to the amount of risk received, involve a very high level of prospective or retrospective premiums. While these approaches include „risk financing“ as opposed to „risk transfer,“ they are generally referred to as ALTERNATIVE Risk Transfer, ART. The ART market includes risk groups (RGS), insurance pools and captive insurers, 100% subsidiaries that provide risk reduction to their parent company or a group of related companies. From market developments and fire to loss of reputation, what are the top 10 concerns of risk management experts, in addition to cyber and business interruptions? Life insurers have developed a very broad range of alternative approaches to risk transfer, including life insurance securitization, full repayment reserve, capitalized letters of credit, burden relief reinsurance, administrative reinsurance and related techniques. Since life reinsurance is primarily more „financial“, there is less separation between conventional and alternative markets than in the claims and accidents sector.

Alternative risk transfer, also known as ART, is the use of alternative techniques to obtain the same coverage and risk transfer from a risky business as in the case of traditional insurance or reinsurance. An alternative risk transfer allows companies to transfer risk to another party or risk in the capital market and protect them from certain risks that are intended to cover transactions.