Alternative Market

A term commonly used in risk financing to refer to one of a number of risk funding techniques (e.g., self-insurance, captive) or facilities (e.g., ACE, XL) that provide coverages or services outside the realm of those provided by most traditional property and casualty insurers. The alternative market may be utilized by large corporations, for example, to provide high limits of coverage over a large self-insured retention. It may also be utilized by groups of smaller entities, for example, participating in a risk retention group or group captive program. Note that the distinction between traditional and alternative markets tends to blur over time as many traditional insurers have expanded their offering of products to encompass alternative-type funding techniques, and vice versa. Finally, retrospective funding plans, especially paid loss plans, are sometimes identified with the alternative market.