Alternative risk transfer (ART) refers to risk financing and protection solutions that sit outside traditional insurance and reinsurance, often combining risk retention, capital markets and bespoke structures (such as captives, parametrics or insurance‑linked securities) to cover risks in a more flexible, tailored way.
Example: A simple example of alternative risk transfer is a company issuing a catastrophe bond instead of buying traditional catastrophe reinsurance: if a predefined event (for example, an earthquake above a certain magnitude in a defined region) occurs, the bond investors lose their capital and that money is used to cover the company’s losses.
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