ALTERNATIVE RISK TRANSFER (ART)
\ɔːltˈɜːnətˌɪv ɹˈɪsk tɹˈansfɜː ˈɑːt], \ɔːltˈɜːnətˌɪv ɹˈɪsk tɹˈansfɜː ˈɑːt], \ɔː_l_t_ˈɜː_n_ə_t_ˌɪ_v ɹ_ˈɪ_s_k t_ɹ_ˈa_n_s_f_ɜː__ ˈɑː_t]\
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A product, channel, or solution that transfers RISK exposures between the INSURANCE and REINSURANCE sectors and the CAPITAL MARKETS in order to achieve specific RISK MANAGEMENT goals. As a result of regulatory rules and DIVERSIFICATION benefits, it is often desirable to shift INSURABLE RISKS to the financial sector and FINANCIAL RISKS to the insurance sector; ART mechanisms, such as CAPTIVES, DERIVATIVES, INSURANCELINKED SECURITIES, CONTINGENT CAPITAL, and ENTERPRISE RISK MANAGEMENT, make this possible. See also CONVERGENCE.
By Henry Campbell Black
