Define risk retention.

Risk retention

Risk retention finances the loss by retaining the operating revenues and earnings. Most familiar type of risk retention is self insurance. Self-insurance is a strategy in which part of an organization‟s earnings is set aside to deal with losses. In its general form, self-insurance assigns a contingency fund for all future losses. In its specific form, self-insurance plan assigns funds to specific loss categories like property, health care policies and so on.Risk retention implies that a firm always retains part or all the losses resulting from a given loss. Risk retention is generally active. Active risk retention defines a firm that knows about the exposure loss and plan in order to retain part or all of it.