As market dynamics evolve, many businesses are looking for ways to retain and finance more risk internally or transfer it strategically to maintain stability and control costs.
ART is emerging as a key component of forward-looking risk strategies that extend beyond traditional coverage and address complex risks. Demand for ART solutions, from annual programmes to multi-year structures such as parametric, captive insurance and structured solutions, continues to grow.
With the UK's new captive legislation favouring domestic captive formations, UK businesses now have a unique opportunity to manage risks locally. With an expanding range of global captive-friendly jurisdictions, a favourable insurance market and innovative ART solutions, UK businesses are well-positioned to explore alternative methods for retaining and transferring risk.
Types of ART solutions
Why are ART solutions becoming more mainstream risk financing options for UK businesses?
According to Artex, Gallagher's captive management and alternative risk solutions business, there is a growing interest in ART solutions, even as commercial insurance pricing becomes more competitive. Paul Eaton, chief executive officer of Artex EMEA, said that "captive formation is on the rise and is no longer just a reaction to market conditions when things get tough."
The increasing demand reflects businesses' confidence in investing in ART solutions, looking to build a more proactive risk management model. Several key factors are playing a significant role in making ART solutions more relevant.
- As the market softens, businesses are showing confidence in ART solutions to retain risk where it makes sense and transfer it where it doesn't.
- Adoption of captive and parametric insurance is expected to rise. These solutions enable businesses to design protection that matches their real risk exposures, introducing agile and customised solutions.
- Analytics and data-driven insights are making ART more accessible and actionable for decision-makers.
- In recent years, captives and parametric programmes have been tailored to help mid-sized organisations, not just large global enterprises, as barriers to entry have come down.
- With ART solutions better integrated into risk management, businesses are gaining better visibility into their total cost of risk and understanding their ability to reinvest savings into long-term growth.
- An evolving market has created an opportunity for businesses to reassess how they want to absorb shocks and respond. Transferring risks via alternative solutions is a key part of their new risk management playbook.
- For emerging risks where options within the commercial insurance market may be limited, ART solutions offer a viable alternative and the ability (via captive insurance) to 'incubate' the risk and build up a claims history over time.
Why is this the right time for UK businesses to adopt ART solutions?
Globally, captives are transitioning from a niche tool to a mainstream solution, building proactive risk resilience programmes. As a 2025 Association of Insurance and Risk Managers in Industry and Commerce (Airmic) survey found, nearly half of UK captive-owning members adopt a ‘captive first' approach, prioritising their captive insurance companies as the primary mechanism for managing and financing risks1.
1. Government-backed reforms unlocking new opportunities
The UK government's Risk Transformation Regulation of 2025 and proposed reforms aim to position the nation as a leading captive domicile by 20272.
This friendly reform will boost the UK's appeal as a captive domicile, encouraging domestic formations and welcoming foreign capital. UK businesses will benefit from favourable setup costs, reduced regulatory burdens and onshore access to self-insurance vehicles like protected cell companies. This regime demystifies captive insurance for first-time users and offers an option for companies that want to incorporate a captive in the same jurisdiction.
In addition to the new reforms, UK businesses also have access to established European captive domiciles like Guernsey, Luxembourg and Malta, offering additional choice3. These jurisdictions are renowned for their mature regulatory frameworks and access to global reinsurance markets, offering flexibility for diversifying risk financing internationally.
2. Conducive market conditions to invest in alternative solutions
UK insurance pricing in most product lines has become more competitive. While this benefits commercial insurance buyers, it also creates a unique opportunity to focus on alternative solutions like captive as a complement to traditional insurance. This is because:
- There is less urgency in the current market to address pricing and capacity issues with the added benefit that captives are well-positioned to negotiate stable, long-term reinsurance arrangements.
- Companies can focus on long-term strategic risk management rather than short-term market challenges. They can also leverage ART to diversify risk financing while capitalising on current market flexibility.
3. Evolving and complex risks need innovative solutions
ART offerings like parametric solutions are gaining traction in addressing risks that have traditionally been underinsured, such as:
- Non-damage business interruption, such as supply chain disruptions and port closures
- Climate and extreme weather exposures
An additional benefit of parametric solutions is that they pay out quickly based on predefined triggers, immediate access to post-event financing, helping to ensure business continuity.
Amidst the UK's growing exposure to cyberattacks and AI-fuelled threats, traditional insurance may lag in assessing and responding to emerging risks. Parametric models are a timely complement to traditional indemnification by providing an additional source of risk financing based on pre-agreed parameters, such as a network intrusion.
Captive insurance offers another alternative for exposures which are rapidly evolving and may lack affirmative wording in current commercial insurance policies. For example, traditional insurance may fail to address non-physical damage, such as supplier insolvencies triggered by supply chain disruptions. A combined captive-parametric approach helps to cover all bases by offering a more comprehensive and responsive solution when managing intangible risk.
Where ART solutions really stand out is in their ability to deliver innovative, flexible coverage tailored to evolving business needs. If any business is hesitant to form single-parent captives, they can transfer their risk to PCCs.
4. The scope of captives is now evolving
While many captives have roots in property programmes, their role is expanding to cover a wider range of risks, including cyber, Directors' and Officers' (D&O) liability, environmental exposures, employee benefits, and even emerging risks linked to climate transition and reputation.
There are a number of opportunities to be gained by opening captives up to more diverse use cases. With captives in their employee benefits programme, companies can focus on more employee-friendly wellness and healthcare programmes, for instance. A more diversified book of business is also more capital efficient and provides the parent company with data and insights that can be used to improve enterprise risk management.
5. Manage ESG (Environmental, Social, and Governance) risks more effectively
With ART solutions, companies can manage ESG risks with more control and transparency.
With the use of internal data (operational, financial, etc.), captives can be used to fund ESG initiatives and protect businesses from environmental liabilities, management liabilities or reputational risks. Such an approach helps businesses align with ESG goals by promoting resilience, sustainability and responsible risk management.
Unlock the potential of ART solutions
Alternative Risk Transfer is no longer a niche concept — it has become central to how resilient businesses manage, retain and finance risk. By exploring captives, parametric covers, and structured solutions early on, risk managers can align coverage with evolving business goals, improve cost efficiency and demonstrate strong governance.
While ART discussions often surface during renewals, their real value lies in proactive, year-round planning, regardless of what is happening in the broader commercial insurance market cycle. In a highly commoditised insurance market, ART offers a strategic edge.
For guidance on navigating the UK's new captive regime or evaluating global domiciles, speak to our captive specialists at Gallagher, who can help you design a solution tailored to your risk profile. If you're exploring broader alternative risk strategies, connect with our brokers to discuss how ART solutions can complement your insurance programme.
