Risk Retention

Summary of Risk Retention

Also known as self-insurance, a conscious decision to retain an identified economic risk rather than purchase insurance. This decision is made after comparing the cost of insurance with the likelihood, frequency, and severity of a possible loss. Normally, the money saved by not purchasing insurance is placed in a fund against a possible loss. Unlike no insurance, which is generally the result of a failure to identify or quantify the risk and is, therefore, an absence of a plan to respond to a loss, self-insurance is the product of a conscious decision to forego commercial insurance.

(Main Author: William J. Miller)