Alternative Risk: FAQs

Insurance Choices > Alternative Risk > FAQs

Are ART programs only for very large companies?

No. National Interstate offers innovative ART programs for trucking and passenger transportation companies of nearly any size. By offering ART programs with low-risk retention levels, even transportation companies with as few as 30 units can comfortably participate in a risk-sharing program.

I'm currently on a large deductible. What are the advantages and disadvantages of an ART program?

In some respects, a large deductible and an ART program are similar in that the insured is assuming a significant amount of risk. However, with a large deductible, the worst case scenario is unknown and potentially severe. With an ART program, the overriding goal is to stabilize the price of insurance from year to year and, over the long term, recognize a reduced cost of insurance. Further, an ART product typically requires far less collateral than a large deductible plan and provides a cap on the worst-case scenario through an aggregate stop loss feature. Finally, ART participants generally recognize a markedly different level of service and sophistication from their insurance carrier. Most ART participants see dramatic improvements in overall risk management. 

Is Alternative Risk Transfer cheaper than traditional insurance?

When considering an ART product, one must think of the bigger picture - the overall, total cost of insurance over several years. Traditional insurance moves in cycles, and in some years traditional insurance premiums may be "cheaper" than an ART program. However, when looking at the net effective cost of risk financing, the services provided, and actual value received, ART programs are frequently the best long-term solution for larger and more sophisticated clients. 

What are some of the benefits of choosing an ART program?

Perhaps the most significant benefit of choosing an ART product is your ability to better control cost of risk. Unlike the traditional insurance market, premiums in ART Program products are less affected by stock market returns, natural disasters and insurance capacity. So, while premiums in the traditional insurance market fluctuate between hard and soft market cycles, the cost of risk when managed through an ART product will be more stable and predictable through any market cycle.

An ART product also gives the insured the ability to reduce cost of risk through the potential return of premium in the form of underwriting profit and investment income. These funds are distributed to companies who manage losses effectively. Further, in an ART product, a true partnership is built between the insured and insurance carrier, improving communication, claims outcomes, and satisfaction with the insurance program. Flexible risk retention options, favorable collateral requirements and a built-in aggregate stop loss are also benefits of using an ART product.

What does National Interstate provide?

For our ART clients, National Interstate provides a streamlined package of services that make ART participation simple and painless, including:

  • Exclusive ART service staff
  • Cayman Island based ART reinsurance facility
  • Access to our surplus, licenses and admitted paper
  • Policy issuance
  • ART service coordination and general oversight
  • Investment services
  • Financial reporting
  • Claims handling
  • Risk Management
  • Aggregate stop loss protection
  • Access to Senior Management

What is an ART, or captive, insurance company?

A captive is an insurance company formed specifically to insure the risks of a parent company or a group of companies. The ART policyholder owns or "rents" the insurance company that insures it. 

What is the difference between a heterogeneous and homogeneous group captive?

The terms simply refer to the class of business that the captive is insuring. A homogeneous captive is one that insures the risk of common classes of business. For example, a homogeneous group captive many insure a collection of trucking companies. A heterogeneous captive, in contrast, might have a trucking company, a mining company and a drywall contractor all sharing risk in the same group captive.

What is the difference between a single-parent and group captive?

A single-parent captive is an insurance company formed to insure the specific risk of one company (and its subsidiaries), whereas a group captive insures the risks of multiple non-related companies. Both group and single-parent captives may be formed on an owned or rental basis. National Interstate currently offers both group and single-parent programs on a rental basis, as well as group-owned programs.

What is the difference between an owned and rental captive?

An owned captive requires the parent company to capitalize an insurance company (fund its surplus) and manage all the supporting insurance functions. In a rental captive, the participant "rents" access to surplus, insurance licenses and other critical insurance functions, including claims handling, actuarial and underwriting services, captive management and fronting. National Interstate currently supports both owned and rental programs.

When should I consider an ART option?

The insurance market moves in “hard” and “soft” market cycles.  While there may be bargains to be had during a soft market, the best time to fix a leaking roof is when the sun is shining. Thus astute insurance buyers understand the many benefits alternative risk options can bring, and recognize ART programs are often the smartest solution no matter what general insurance market conditions may be.

Who issues the insurance policy?

National Interstate issues the A rated primary insurance policies and can place or assist in placing excess insurance.

Why don't more insurance companies offer ART options to their insureds?

Alternative Risk Transfer programs require significant expertise and a substantial ART infrastructure. National Interstate manages more than a quarter billion dollars in ART premiums and, as such, has developed considerable expertise and economies of scale with its ART offering. National Interstate is a leader in ART programs for the trucking and passenger transportation world. 

Why National Interstate?

National Interstate is admitted in all 50 states, rated "A" Excellent IX by A.M. Best, and over the past 15 years has become recognized as a heavyweight in alternative risk solutions for "wheels" risks. For alternative risk solutions in the transportation market, our expertise is unrivaled.