Alternative risk transfer products such as parametric insurance and insurance-linked securities continue to move into primary insurance lines from the reinsurance sector, with more firms featuring them and more clients considering them to cover new risks.

Marsh L.L.C. in June formed its alternative risk transfer group, a virtual working group within the company to better connect its resources in the area, said Duncan Ellis, U.S. property practice leader for Marsh in New York.

“Insurance companies have created dedicated groups around these products, and as such we thought it was the right time to create a group to focus on these nonstandard solutions also known as alternative risk transfer products,” Mr. Ellis said.

The products are also drawing more attention from clients and policyholders seeking new or broader coverage, potentially on a long-term basis, according to sources.

“We’re working with our broker on broader risk solutions and this has been part of the conversation for the past couple of years,” said Jennifer Hills, director, office of risk management services, for the King County Department of Executive Services in Washington state.

“We would want to make this part of our ongoing insurance strategy in a way that supplements our current self-insurance and purchased insurance portfolio,” Ms. Hills said. “What we don’t want to do is occasionally purchase a catastrophe bond or parametric coverage.”

Such products can also be used to extend coverage to new areas.

“We are looking at certain facilities that we currently don’t insure, like our roadways, bridges, and underground tunnels,” Ms. Hills said.

The diversifying nature of the industry’s capitalization and growth of third-party capital has also helped drive growth for alternative risk transfer, sources said.

While parametric insurance, one popular type of alternative risk transfer, is still largely backed by traditional insurer capital, according to Mr. Ellis, alternative or third-party capital has been expanding into the insurance space for some time.

The coverage is based on data and the achieving or exceeding some agreed-upon measurement, such as wind speed or rainfall.

Alternative capital has for many years been a fixture in the retrocessional reinsurance markets, “but now it is expanding nicely into the insurance space,” Mr. Ellis said.

Investors seeking greater insurance exposure have been helping drive the expansion of capital into primary lines, sources said.

“This has been really taking off in the last couple of years as (insurance-linked securities) investors look to grow assets under management by taking on more risk,” said Bill Dubinsky, New York-based head of ILS at Willis Towers Watson Securities. “Most of the growth has come from ILS investors accessing fronting insurance paper and writing property-oriented lines on a traditional basis.”

ILS investors have grown nonlife assets under management approximately 10% per year for a number of years and have been working on new perils and new points of entry, according to Mr. Dubinsky. “We anticipate even more activity going forward in the insurance space to the extent these downstream initiatives continue to succeed,” he said.

In addition, the market for such products has grown, bringing market competition and decreased pricing, which is also helping to drive momentum, according to Mr. Ellis.

“There are now a number of quality, well-known, stable insurance companies offering these products,” Mr. Ellis said. “This has brought competition in this space versus what we saw many years ago, and any time you start to enter competition, pricing and creativity begins to improve.”