Which of the following describes risk Retention?

• A. Transferring Risk to Another Party
• B. Keeping the Risk and Paying Losses Oneself
• C. Avoiding the Activity Altogether
• D. Accepting All Risk

Answer: (B)

Risk retention is a way of handling potential losses by keeping the risk and paying for any losses yourself, rather than transferring it to someone else. This approach is chosen when losses are manageable, predictable, or when transferring risk (like buying insurance) isn’t cost-effective. By retaining the risk, you fund potential losses from internal resources, such as reserves or self-insurance.

The described choice fits this idea exactly: you keep the risk and cover the losses yourself. The other options describe transferring risk to another party, avoiding the activity altogether, or taking on risk without limitation, which are different risk-management strategies.