Insurance Marketplace Realities 2024 – Alternative risk transfer (ART)

Rate predictions: Alternative risk transfer (ART)

	Trend	Range
Structured programs		Flat
Parametric nat cat		-5% to +10%
Parametric non-cat		Flat to +10%
Portfolio programs		+5% to +15% (Flat to +5% annually)
Captive stop loss		Flat

Structured solutions

• Many insureds now face premium to limit ratios that exceed 50%. This forces exploration of programs that embed significant risk financing.
• In 2023 insurers saw an unprecedented volume of inquiries causing bandwidth challenges as well as creating a margin of opportunity.
  • Turn-around time on deals is now more than eight weeks.
• For those clients with existing programs, expansion into other lines of business leverages built up capital to drive efficiencies across a program.

Parametric solutions

• Many parametric markets paid claims in 2023 (tropical cyclones, wildfire, hail, flooding, etc.). This has two principal effects.
  • Clients have seen firsthand the simplicity and speed of claim payments serving to reinforce the original decisions to adopt the approach.
  • Losses are likely to drive some premium increases and capacity constraints in 2024.
• Innovation continues to occur in this market as insurers embed parametric features into more traditional lines, embrace new data sources, IOT settlement capabilities and address challenging risks, such as cyber and pandemics.
• Application to ESG risks continues to drive adoption as well as increasing participation of client’s captives.

Fronting solutions

• As insureds face significant premium demands coupled with budget constraints, decisions to step outside the market became more frequent. Fronting is now being aggressively deployed to address such risks as cyber, where contracts require evidence of coverage. For investment-grade insureds, collateral “efficient” programs are becoming more popular, i.e., collateral is not required at inception, only if a claim is filed.

Captive solutions

• Captive use has increased, though in North America, that has not translated into multiline stop loss or other ART approaches, as insureds simply retain risk.

Portfolio/integrated risk programs

• Portfolio/integrated risk products are attracting less attention; however, they do continue to perform favorably when compared to many monoline equivalent programs. Underwriters do continue to focus on their structured solutions books.

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).

Contact

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Derrick Easton

Managing Director, Risk & Analytics (Alternative Risk Transfer Solutions)

email Email phone +1 212 915 7826

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