Most organizations think about alternative risk transfer when premiums become painful. That timing is usually late. Alternative risk transfer is a risk financing strategy, rather than simply a cheaper insurance option, and the decision turns on the organization’s financial position, timing, and quality of risk data.
Nick Martin, SVP and alternative risk transfer lead at Alliant Insurance Services, makes the case for acting earlier. He also explains what it takes for an alternative program to deliver.
“Alternative risk transfer is purely a risk financing strategy in that these programs carry cost variance,” Martin said. “The upfront cost may not equal the final (ultimate) cost of the program.”
That framing is where the conversation about timing should start. Martin stresses that every organization weighs cost and financial certainty differently, so the same signals can lead different organizations to different conclusions. He identifies a set of triggers that typically prompt organizations to explore alternative financing:
The first two are organizational in nature, the next two are financial metrics. The last two reflect structural gaps in what the traditional market will offer or absorb.
“Captives continue to dominate the conversation but are not necessarily the final solutions that insureds elect when financing their risk through alternative strategies,” Martin said.
The reason lies in a balancing act most organizations face. “Most insureds looking at alternative financing strategies are balancing cost improvement with cost certainty and, of course, with timing around recognition of said cost improvements,” he said.
Captives remain the most established structure in the market. Marsh’s 2026 Captive Solutions Benchmarking Report found that Marsh-managed captives wrote $79.1 billion in gross written premium in 2025. The year also saw 118 new captive formations under Marsh’s management, up from 92 in 2024.
Martin notes that captives support the financing, allocation, and compliance needs of organizations retaining risk in primary insurance layers. This applies whether or not the captive participates in reinsurance.
For organizations that want captive-like economics without the regulatory overhead, Martin points to structured excess solutions across liability, property, and financial lines. These programs embed a stop-loss component into the placement. Buyers access captive-like economics without forming a licensed vehicle or engaging a separate fronting partner.
The simplest path, however, often delivers the most direct results. “More often than not, the simplest solutions are the best,” Martin said. “Clients are raising deductibles and retentions or finding indemnity fronting partners to simply front the risk without any formalized vehicle or stop-loss mechanism.”
Parametric business interruption solutions are also gaining ground. “Parametric business interruption solutions are becoming more common as that market continues to expand,” Martin said, “with growing interest in non-insurance hedges also becoming part of the conversation.”
The global parametric insurance market was estimated at approximately $19 billion in 2025, according to Global Market Insights. The firm projects it will grow at a compound annual growth rate of around 12% through 2035.
An alternative risk transfer program can be structured correctly on paper and still fail to pay. The gap between a well-chosen structure and one that performs under pressure comes down to program design and organizational preparation.
“Data and analytics are paramount to creating a structure that is beneficial to an insured,” Martin said. “Whether you’re structuring an excess liability placement or procuring a parametric named windstorm buydown, there is no value unless the risk, attachments, and payouts are quantified.”
That quantification has become more precise as modeling tools and data sources have matured. “The best brokers, insurers, and risks participating in alternative financing products are heavily reliant on actuarial modeling and output, along with the ever-expanding utility of natural catastrophe data sets and predictive modeling,” Martin said.
He also identifies what distinguishes programs that perform:
These are structural requirements, rather aspirational targets. A program that falls short on any one of them is unlikely to respond when a loss occurs.
Organizational readiness is the other side of that equation. “The most successful alternative financing strategies are run by organizations that have either implemented, explored, or answered the following,” Martin said. Loss data quality is where many programs encounter their first obstacle.
Actuarial best practice treats five years of historical loss and exposure data as the minimum starting point for a feasibility analysis. The standard is reflected in guidance from the Casualty Actuarial Society and regulatory requirements across multiple domiciles. More years of detailed data mean less reliance on industry averages and more precision tied to the organization’s own loss experience.
Martin also stresses the importance of advisory relationships. Risk management partners who understand risk finance, not just traditional placement, are a prerequisite. Programs are more likely to fall short when the advisors structuring them default to conventional broking instincts.
The final prerequisite is timing. Martin frames it as the difference between a proactive strategy and a reactive stop-gap. Organizations that begin from a position of financial stability have more structural options and more leverage. Those that arrive at alternative risk financing after a renewal crisis have fewer choices available.
The commercial property and casualty market is in a soft phase, according to the Council of Insurance Agents & Brokers (CIAB). The organization’s Q1 2026 market survey recorded the first average decline in commercial premiums since 2017, at 1.2%. For many organizations, the question that follows is whether cheaper coverage makes alternative risk financing less compelling.
“The idea of ‘cheap’ will always be relative and as such, there is always a place for alternative financing in any insurance cycle,” Martin said. “The interesting question in a soft insurance market is: is it more advantageous for my organization to use third-party capital or my own capital to support this risk? Put another way, is my organizational hurdle rate for capital placed at risk able to be met when compared to the cost of third-party capital?”
The comparison does not always favor the market, even as premiums decline. “Depending on industry vertical, risks being insured, and overall size of the organization, even a less expensive marketplace may not be able to compete against self-retention of certain risks,” Martin said.
He argues that what changes in a soft market is the degree of scrutiny applied before an organization assumes more exposure. “What will happen is that certain risks are evaluated with more scrutiny. What are the qualitative considerations and other concerns that must be evaluated before assuming some level of this exposure?”
