In the current market environment more companies are interested in exploring the wide range of solutions Alternative Risk Transfer can offer, like structured insurance – multi-year, multi-line coverages – and captive solutions, according to Grant Maxwell, Global Head of Alternative Risk Transfer (ART) at Allianz Global Corporate & Specialty (AGCS).
In response to the growing demand for these solutions, AGCS is focusing on strengthening and investing in tailored solutions that complement traditional property & casualty products.
Companies have to buy insurance because their clients demand it or it is a regulatory requirement. Sometimes, if for example, they look over a three-year period at their own history of losses, they might not need all the insurance cover they used to buy.
This is an issue ART solutions can help with by offering a more limited, tailored cover that is also cheaper. On the other hand, if a company can realistically expect lots of claims, traditional risk transfer may be the better option, Maxwell explained.
He said: “ART can add significant value, but not in the sense of offering the same product but cheaper. It’s very much a complementary approach and we don’t want to undercut the traditional risk transfer market. The expected cost for an ART solution may be less than the traditional cover, but that’s because the client shares a portion of the risk themselves and they need to be comfortable with this.”
In the current market environment, rate increases may be softening in some areas, but there is still a hard market that makes it more difficult and/or more expensive for many clients to buy traditional covers, Maxwell noted.
He added: “[Clients] are much more incentivized – and some may even be forced – to self-retain more risks and look at alternatives to traditional P&C products. There is also a growing awareness and sophistication of risk managers – they understand much better where ART solutions could work and add value.”
“Another driver of client interest is that the risk landscape is changing so incredibly quickly. Clients and their business models are changing, economic and geopolitical conditions are changing, ultimately risks are changing, and traditional insurance may not be available for such fundamentally new risks as we lack data or claims experience in underwriting.”
Maxwell concluded: “That is where the strength of ART comes in: It’s our different and unique way of looking at corporate risks in a real multi-disciplinary deal teams that bring underwriting, modelling, legal, claims, operations, compliance, everything together. And that makes all the difference and helped us being successful and creating value for our clients over many years.”
