Companies routinely take out property and casualty (P&C) insurance to protect themselves against the risk of damage caused by fire, theft, storm, or any of a number of accidents. But few have stopped to consider whether business risks—which may have a far greater impact on shareholder value—can be transferred to a third party in the same way. Failed product launches, rogue trading, and regulatory changes, to name but a few business risks, can seriously damage a company’s profitability. Yet most companies still regard these as the inevitable, uninsurable perils of entrepreneurialism.

A handful of companies, both public and privately owned, take a different view. They use business risk insurance to preserve or even increase shareholder value in terms of return on equity (ROE) by protecting the cashflow, reducing the amount of capital tied up in the business, or improving their financing terms. In essence, they see business risk insurance as a new and efficient source of capital.

The instruments they use are radically different from most insurance products available today. Yet the concept remains the same: financial risk is transferred to a third party, for a certain price. What is being redefined is the boundary between transferable risk and...