Insurance Marketplace Realities 2025 – Alternative risk transfer (ART)

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