Beyond Traditional Coverage: Embracing Alternative Risk Solutions
Risk managers face the daunting task of managing today’s complex risks. While traditional insurance policies such as general liability, property, and workers’ compensation provide a foundation for coverage, savvy risk managers recognize the need for flexibility and adaptability in their risk management strategies. This is where alternative risk solutions (ARS) come into play, offering an additional layer of control and customization to help businesses effectively manage and transfer risk.
“Alternative risk solutions can help risk managers strike the balance between control and adaptability in their risk management solutions,” said Robert Curtis, ARS Practice Leader at Liberty Mutual Insurance’s Global Risk Solutions. ARS, including parametric, captive, and other program types, have been developed in response to client feedback, tailoring solutions to specific business needs.
Understanding the Role of ARS in Risk Management
ARS offers businesses flexibility by providing innovative, custom-built options to enhance risk management strategies. These solutions enable companies to allocate funds more effectively, a crucial aspect given that every business operates on a budget. “As risk managers aim to control and mitigate risks effectively, ARS can introduce flexibility into risk management strategies, enabling companies to adapt and thrive,” Curtis explained.
Types of Alternative Risk Solutions
- Structured Solutions: Customizable risk transfer options focusing on a single product line over multi-year agreements. These bespoke solutions meet clients’ capital needs and adjust to business fluctuations.
- Parametric Insurance: Coverage that activates based on predefined parameters (e.g., weather-related perils or cyber events), ensuring faster payouts. The transparency and clarity of parametric solutions make them appealing for prompt financial support.
- Captives: A viable option for businesses to manage and insure their own risks, particularly for pressing risks like cyber exposures or supply chain risk.
- Integrated Solutions: Cover multiple lines of coverage with a shared limit, easing administrative burdens and providing clarity of coverage. They act like a comprehensive umbrella policy, promoting efficient capacity and streamlining renewals.
Choosing the Right ARS Program
To select the appropriate ARS, risk managers should remain open-minded, communicate effectively with stakeholders, and adopt a collaborative approach to development. “Risk managers need to be able to communicate how these programs work internally and the value they bring to the business,” Curtis advised.
The Importance of the Right Insurance Partner
The right insurance partner is crucial in achieving ARS goals and addressing risk management queries. Liberty Mutual’s alternative risk solutions team works closely with clients, leveraging extensive knowledge of international risks to develop customized solutions. “By co-creating a solution with a client, we ensure that the program meets its risk management needs today and evolves as the organization changes,” Curtis noted.
For more information on Liberty Mutual’s alternative risk solutions, visit: Liberty Mutual Corporate Resilience
