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Alternative Risk Transfer

Organisations use a variety of capital sources to fund their risks: banks, insurers, shareholders and others. By merging the best of capital market techniques with insurance structures, so-called 'alternative' risk transfer (ART) solutions enable companies to select the most appropriate risk finance and acquire contingent capital at economic cost.

ART solutions can fulfil a wide variety of needs including general earnings smoothing, managing speculative risks, risk hedging, deal facilitation and removal of specific balance sheet provisions.

In particular, ART can be used:

  • To hedge risks (or accumulations of risks) considered by a company to be non-survivable or unacceptable, for example, commodity, exchange rate or weather risks
  • To gain a financing cost advantage over the competition, for example utilising insurance structures to which competitors may not have access
  • To reduce the cost of borrowing, for example in certain circumstances, insurers' contingent capital may be cheaper than standby lines of credit
  • Where a lender of capital may stipulate some form of insurance coverage, for example, as part of a credit enhancement deal.

Willis has extensive experience in helping our clients to achieve these objectives. In particular we have a team fully qualified as registered representatives under the Financial Services Reform Act, focused on developing and placing ART transactions and liaising with the ART market.

These capabilities represent key ingredients required in an ART solution. We understand clearly that these solutions need to be aligned with corporate strategy. We focus on working with you to develop a risk strategy attuned to the needs of your business from which an appropriate solution can be determined and implemented.