In a recent article, global broker Aon has highlighted that the continued growth of alternative capital sources is enabling more efficient risk management by bringing solutions closer with underlying risks.
Moreover, a risk capital strategy combines traditional risk transfer with alternatives such as reinsurance, structured solutions, parametrics, captives, and insurance-linked securities.
These alternative risk transfer methods provide companies with direct access to capital, enabling cost savings and tailored risk management that balances risk transfer, retention and alternative solutions.
“As alternative capital sources expand, they drive more efficient risk management solutions by moving closer to the underlying risks,” Aon said.
“Traditional forms of risk transfer can no longer solely address the wide variety of risks across an organization. Alternative risk transfer solutions address exposures that were previously retained and also unlock capital,” commented Ryan Barber, Global Head of Property at Aon.
We have of course seen capital providers seeking to move closer to underlying risks of late, through the expanded use of reinsurance sidecars and other ILS-style structures across a broadening range of risk classes.
As per Aon Securities, the outstanding market for collateralized reinsurance sidecar arrangements grew by roughly 70%, reaching a record high of $17 billion by mid-2025.
We have particularly seen momentum continue to grow for casualty reinsurance sidecars throughout 2025, which clearly suggests that the structure remains a key focus for protection buyers. While increasingly MGA’s and program specialists are also accessing alternative capital through sidecars and similar vehicles for a range of risks.
The broker also stressed that the current buyer-friendly market provides businesses with an opportunity to view risk management as a “strategic asset that enhances business value.”
“The use of alternative, non-traditional risk transfer methods is one way to manage volatility and unlock access to strategic sources of capital,” Aon said.
“If you are trying to use non-traditional solutions to enhance your portfolio, the soft market is a perfect time to do that. Traditional underwriters are much more flexible and willing to allow changes to the portfolio. It’s a great opportunity to experiment,” said Toby Owen, Executive Director, International Property, Europe, Middle East, Africa and Asia.
The broker outlined four alternative risk transfer methods: parametric risk transfer, captives, facultative reinsurance, and structured solutions, in which organisations can use to directly access capital tailored to their risk appetite.
“If you’re not making changes in the soft market, you are exposing your program to volatility if the market goes the other way. So now is the time to think about taking a portion of your shared and layered program and making it a multi-year program,” added Michael Gruetzmacher, Head of Alternative Risk Transfer in North America at Aon.
