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Foundations of Casualty Actuarial Science

retention, contractual transfer to a non-insurer in which
the legal liability is retained, and transfer to an insurer.

43. Risk Retention
The normal state of events is for an individual or entity
to retain its exposures to possible loss. This is risk
retention. Sometimes the term "self-insurance" is used.

a) Risk retention can be passive or active. Passive risk
retention refers to exposures to possible loss that
the retained because they have not been identified
or have been forgotten.

b) Active risk retention is the preferred state. In active
risk retention, the exposures to possible loss that
been carefully evaluated, and a conscious decision
has been made to retain them.

44. A special type of risk retention is pooling. In pooling,
entities get together and share their exposures to possible
loss. Thus, individual entity retains some of its own
exposure to possible loss and accepts some of the other
pool members' exposures to possible loss.

45. Contractual Transfer to a Non-Insurer
Contractual transfers to a non-insurer as a risk financing

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