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The ART Of Risk Finance

Alternative risk transfer, also known as ART, uses alternative techniques to achieve the same hedging and transfer of risk from a risk-bearing entity without using traditional commerce insurance. It gained traction during the 1990s when insurance capacity issues drove insurers to seek new ways to pass on their risks to a third party. Similarly, a portion of the insurance market that allows companies to purchase coverage and transfer risk without using traditional methods constitutes of ART market. It includes companies that provide risk mitigation or captive insurers, risk retention groups, and insurance pools.

The ART market functions with risk transfers through two broad primary segments:

Alternative Products

The main areas of risk transfer through alternative products include risk securitization through catastrophe bonds, insurance-linked securities, contingent capital, derivative contacts, trading of risk through industry loss warranties, longevity risk transfer, and other alternative risk financing techniques.

Alternative Carriers

Companies have numerous options when it comes to choosing an alternative carrier to adjust the amount of risk in their portfolio. The largest proportion of alternative carriers is as follows:

Self Insurance

Individuals and companies set aside their own money to pay for possible losses instead of purchasing insurance with another company and reimbursing them for loss if any. With self-insurance, companies and/or individuals that suffer the loss pay the costs rather than filing a claim under an insurance policy. It allows companies to reduce and regulate costs while streamlining the claims process. As a result, this type is often associated with cost efficiency and increased loss control.

Risk Retention Groups & Captive Insurance

Risk Retention Groups & Captive Insurance as an alternative carrier is quite popular among large corporations. Businesses that face the same risk usually use insurance pools that allow them to provide insurance coverage. It is often associated with governmental entities and is frequently used to deal with workers' compensation coverage.


Within a decade, the methodology has come forward and is used frequently among businesses and individuals. It is high time for investors, financial institutions, and insurance companies to explore more on the subject and gain a competitive edge. The Money 2.0 Conference provides a platform for experts to share their insights on alternative risk transfer as well as risk finance.

01/20/2022 - 13:08
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Author Name
Yash Dogra
Author Bio

Yash Dogra is deeply interested in learning more about the world of finance and is a cryptocurrency enthusiast. He is a member of the organizing committee of the Money 2.0 Conference which will explore insurance and finance trends, acquaint attendees with new financial management tools, and highlight tactics to stay safe from fake/fraud investment schemes as well as spam and stock market scams.