New methods of financing significant risk transfer investments are gaining momentum as investors tap into insurance demand for exposure to the asset class.

Credit insurers are a growing part of the SRT market, having made inroads by persuading some issuers (and regulators) to accept unfunded protection, but also by teaming up with others to do funded deals through repack structures.

Now, some insurers are matching their appetite for risk with specialist credit funds’ desire for leverage in inventive new structures, some of which are expected to close before year end.

Firms with insurance structuring and underwriting expertise like Karson Management, Ryan Specialty and Lockton Re have been pitching the novel structures to insurers and funders, in hopes of scaling them up as financing channels for SRT and other kinds of private credit.

The deals being worked on bring in insurers to cover the mezzanine tranche risk on pools of multiple SRT or private credit investments. The structures are also being set up in advance to fund and lever future investments.

The goal is to distribute the risk between specialist credit funds and insurers, while also financing the insurers’ portion, in a repeatable structure with low upfront and running costs.

However, obstacles remain – it is unclear whether these programmes will be able to reach the scale needed to offset financing and structuring costs, and structures must carefully address regulatory and accounting risks.