What is Alternative Risk Transfer?

Legal Definition
Alternative Risk Transfer (often referred to as ART) is the use of techniques other than traditional insurance and reinsurance to provide risk bearing entities with coverage or protection. The field of alternative risk transfer grew out of a series of insurance capacity crises in the 1970s through 1990s that drove purchasers of traditional coverage to seek more robust ways to buy protection.

Most of these techniques permit investors in the capital markets to take a more direct role in providing insurance and reinsurance protection, and as such the broad field of alternative risk transfer is said to be bringing about a convergence of insurance and financial markets.
-- Wikipedia
Legal Definition
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.