In my previous article, we explored a simple idea: every company is financing some of its own risk, whether intentionally or not. Which raises the obvious next question: how can a company strategically navigate and position itself along the spectrum?

The answer tends to surprise people, because it isn’t a structure, such as a captive, or a cell, or any of the vehicles we’ll discuss later. It’s quieter than that. It starts with which question gets asked first.

Two people, two questions

Picture two executives preparing for the same renewal.

The first executive is a coverage buyer. The questions are familiar: What’s covered? What’s the premium? Can the same protection be had for less? Reasonable questions, and most of the market is built to answer them. In this frame, insurance is a product to purchase at the best price once a year.

The second executive is a risk financier. The questions change: Which of these risks does the company understand and control well enough to fund itself? What do they truly cost over time, not just at this renewal? Is the next dollar better spent on a premium, or on the company’s own capital? In this frame, risk is something to finance deliberately, over years, rather than hand off annually.

Same company, same risks, same renewal. Two very different conversations, decided entirely by which question came first.

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From price to cost of risk

The coverage buyer optimizes the premium. The financier optimizes something larger, what the discipline calls total cost of risk: the premium, plus the losses a company retains, plus the cost of running the program, plus the cost of the capital it ties up. The premium is only one line in that total.

Once the whole cost comes into view, some things invert. The cheapest premium can carry the highest total cost of risk, and a higher premium can quietly turn out to be the better deal.

From one year to many

There’s a second half to the shift, which focuses on time.

Insurance is sold a year at a time, so we are trained to think a year at a time. But risk doesn’t arrive in neat annual boxes. It plays out over many years, in good stretches and bad. The financier looks at the multi-year picture, where a run of strong years can compound in a company’s favor rather than reset to zero at every renewal. As noted in my previous article, in a pure-transfer arrangement the reward for a good year tends to stay with the carrier. The multi-year view is what lets a company begin to keep some of that value.

Why this is the real unlock

Here’s the part worth holding onto. A company doesn’t need to be large to think like a financier. The mindset comes first, and the structures are simply tools that serve it. How much to retain, what the risk really costs, where capital works hardest: those questions are available to almost any well-run company today, at no cost.

This strategy still likely requires transferring risk and purchasing insurance. A good financier still transfers plenty: the catastrophic risks and the risks not well quantified or understood. The point was never to retain everything. It’s to decide deliberately, rather than by default.

Where this is heading

With the mindset in place, the next questions become practical. How much risk should a company retain? What structures fit its goals? How much capital should it commit? Those are the kinds of questions that advisors, captive managers, and risk-financing specialists help organizations work through every day. For companies exploring that path, strategic partners can help bridge the gap between understanding the principles of risk financing and putting them into practice through a program designed around their specific needs.

One question I’m sitting with

If the shift really is just a change in the opening question, then the most useful thing I can do is make the financier’s questions easy to hear. So, here’s what I keep wondering... in the renewals you come across, which question tends to come first: what it costs, or what it costs over time? Hit reply and tell me what you see. Your answer shapes what I write next.

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A capable business owner will tell you, with real confidence, “We don’t self-insure.” And almost every time, their program already carries meaningful deductibles across several lines.

Here’s the part that’s easy to miss: a deductible is self-insurance. When a company agrees to cover the first $25,000, $100,000, or $500,000 of every claim, it is already financing that layer of risk itself. The real question was never whether risk is retained. It’s whether that retained risk is understood, measured, and actually managed.

That’s where the gap usually shows up. Most companies aren’t misjudging their risk. They’re mis-measuring it. The risk they keep sits scattered across deductibles, policies, and renewals, looked at one line at a time but never pulled together into a single, clear picture.

It’s a dial, not a switch

Retaining risk was never an all-or-nothing choice. It isn’t a switch with two settings. It’s a dial, and it turns across a full spectrum, from transferring almost everything to an insurer to financing most of the risk yourself.

At one end of that spectrum, a company transfers almost everything for a fixed premium, what the industry calls guaranteed cost. At the other, it finances its own risk through a structure it controls, like a captive. In between, where most companies already operate, sit deductibles, retentions, and hybrid designs.

Every company has already set that dial somewhere. The only real question is whether the setting was chosen on purpose, or simply inherited.

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What’s actually at stake

When a company retains risk without managing it, it tends to give away the value that comes with it.

Picture a genuinely good year, where losses land well below what the premium assumed. In a guaranteed-cost arrangement, that favorable result doesn’t come back to the company. It stays with the carrier. That isn’t anyone doing anything wrong. It’s how the structure works, and the carrier took on the risk that the year could have gone the other way. But when a company’s results come in better than its premium assumes, year after year, it may be paying to transfer volatility it already controls, andgiving up the economics that come with it.

This is where the conversation moves from price to total cost of risk. Managing the retained position on purpose is, at heart, a way to keep more of the value that good risk management already creates. No magic, no loophole, no gimmick. Just a more deliberate answer to a question every company is answering by default.

Why it usually goes unseen

If the opportunity is this consistent, why does it stay hidden?

It’s because retained risk rarely shows up as a single, visible number. It’s spread across deductibles, program design, and dozens of separate decisions, reviewed once a year but never added up or actively governed. So companies end up managing insurance programs, not risk positions.

The turning point is simple. When the full retained position is quantified and seen in one place, it stops being a byproduct and becomes something a company can manage with intent. At that point the question changes, from “what coverage should we buy?” to “what outcome are we trying to produce?”

Where this is heading

With that foundation set, the next issues get concrete. We’ll look at what it means to think like a risk financier rather than a coverage buyer, how the structures actually perform, and where companies tend to start before the approach matures over time.

This was never about moving all the way to self-insurance. It’s about bringing discipline, visibility, and control to a position companies already hold.

One question I’m sitting with

The next time an insurance program crosses your desk, step back from the individual policies and look at the whole. How much risk is the organization already financing, in total? And is that position being managed with the same discipline as any other line on the balance sheet?

Most companies have already set the dial. The ones that pull ahead set it deliberately, not by default.

That’s the gap I keep coming back to. Tell me what you see in your own world. It shapes what I write next.

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Picture a company you’d call well run. Fifteen years in business, a clean loss history, a safety culture that actually means something on the floor. Every year, a few weeks before renewal, it gathers its loss runs, takes a quote, negotiates at the margins, and signs. The number goes up a little or down a little. The process repeats.

Inside that company is risk that is stable, predictable, and well managed — exactly the kind of risk a business could choose to finance more efficiently itself. The option to do that exists. It is not exotic. It has been used by the largest companies in the world for more than forty years. And yet, in most companies like the one I just described, the conversation about whether to use it never happens.

Not because the answer would have been no. Because no one ever fully understood it was on the table.

That gap — between a proven option and a company that never seriously weighs it — is what I want to write about here, every week.

What “the alternative” actually is

When people hear “alternative risk finance,” they often reach for the vehicles: captives, group captives, cells, risk retention groups, fronted programs. Those matter, and we’ll get into all of them. But the vehicles aren’t the idea. The idea is simpler and more useful than the jargon makes it sound.

Alternative risk finance is a different way of deciding how to fund the risk you already carry. Every company holds risk whether it names it or not. The conventional approach is to transfer as much of it as possible to an insurer and treat the premium as a cost of doing business. The alternative approach asks a sharper question: which of these risks do we actually understand and control well enough to finance ourselves, and which should we genuinely transfer? Retain what you can manage. Transfer what you can’t. Be deliberate about the line between the two.

That’s it. Everything else — the structures, the domiciles, the actuarial work — is machinery in service of that one decision about choice and control.

The largest companies have been making that decision deliberately for decades. The question that interests me is why its understanding thins out so quickly the moment you move below the top of the market.

Why the option goes unexamined

After enough years around this, I’ve stopped believing the gap is about fit. Plenty of companies that never look at the alternative would qualify for it comfortably. The gap is somewhere else, and I think it comes down to three honest things.

The first is that this is genuinely complex. The alternative asks a company to think like a risk financier rather than a coverage buyer — to get comfortable with actuarial credibility, capital, collateral, governance, and a multi-year time horizon instead of an annual one. That’s a real learning curve. Complexity is a perfectly legitimate reason a good option goes unexamined. It isn’t anyone’s failing; it’s just hard.

The second is that the alternative is nobody’s default. The status-quo renewal is the path of least resistance for everyone involved, the buyer included. Looking seriously at a different structure takes deliberate effort and time that a busy CFO has to actively choose to spend, usually against a dozen things that feel more urgent. Inertia is quiet and powerful, and it wins most years.

The third is that the education is uneven. Where someone has had this explained to them clearly — patiently, in plain language, with the math made legible — they tend to engage with it, and a meaningful share go on to use it. Where they haven’t, the option simply stays invisible. The differentiator, over and over, is understanding. Not suitability.

The more of this market I see, the more convinced I am that the binding constraint isn’t whether companies qualify. Plenty do. The constraint is that the alternative is hard to understand and easy to never get around to. And that is a problem education can actually solve. That’s most of why I’m writing this.

Why now, and why me

I’ve spent more than twenty years in alternative risk and alternative capital — across group captives, cells, single-parent captives, risk retention groups, fronted programs, and reinsurance, onshore in the U.S. and offshore around the world. In that time I’ve watched the alternative work for companies that committed to understanding it. I’ve also watched far too many qualified companies never get a clear, honest explanation of what it even was.

I don’t think that’s anyone’s fault. I think it’s an information problem. And information problems are worth writing about.

To be clear about the boundaries: everything here is my own perspective, offered in my own name. None of it speaks for my employer or anyone’s clients, and none of it will trade on anything I can only see from where I happen to sit. The goal is to share what’s broadly true about this market, in language anyone can follow.

What this newsletter will be

My plan is one issue a week, focused on three things: building awareness that the alternative exists, explaining how it actually works without the jargon, and helping you assess — honestly — whether it’s worth a closer look for a given situation. Some weeks that means demystifying a single concept. Some weeks it means a question worth sitting with. Some weeks it means a concrete signal that a company should at least run the analysis.

I’d also like this to be a conversation rather than a broadcast. If you’re a CFO, a risk manager, a broker, a captive manager, or a regulator, you see things I don’t, and I’d rather be sharpened than agreed with. Reply to any issue. I read them.

The company I started with — the well-run one renewing on autopilot — isn’t doing anything wrong. It’s doing the normal thing. I just think there is almost always an alternative worth understanding, and most people never get it explained clearly enough to weigh it. That’s what this is about.

One question I’m sitting with

If the gap really is understanding rather than fit, then the most valuable thing isn’t a better product — it’s a clearer explanation. So here’s what I keep turning over: what’s the one thing about alternative risk finance that someone tried to explain to you, and it just never clicked? That’s probably where I should start. Tell me, and I’ll write it.