Which of the following is NOT a goal of risk retention?

Which of the following is NOT a goal of risk retention?

• A. To minimize the insured's level of liability in the event of loss
• B. To reduce expenses and improve cash flow
• C. To increase control of claim reserving and claims settlements
• D. To fund losses that cannot be insured

Answer: (A)

The correct answer identifies a statement that does not align with the goals of risk retention. Risk retention involves the decision to assume the financial responsibility for certain risks rather than transferring them entirely to an insurance provider. The primary objectives of this approach include reducing costs associated with insurance premiums and enhancing cash flow by retaining more risk within the organization. By managing risk retention effectively, an organization can gain greater control over claims, allowing for better claim reserving and settlements. Funding losses that cannot be insured is also a critical aspect, as it acknowledges that some risks may not be feasible to transfer to an insurance provider. In contrast, minimizing the insured's level of liability in the event of a loss is generally more aligned with risk transfer strategies, whereby an organization seeks to limit its exposure through insurance rather than retaining that risk.

The correct answer identifies a statement that does not align with the goals of risk retention. Risk retention involves the decision to assume the financial responsibility for certain risks rather than transferring them entirely to an insurance provider. The primary objectives of this approach include reducing costs associated with insurance premiums and enhancing cash flow by retaining more risk within the organization.

By managing risk retention effectively, an organization can gain greater control over claims, allowing for better claim reserving and settlements. Funding losses that cannot be insured is also a critical aspect, as it acknowledges that some risks may not be feasible to transfer to an insurance provider. In contrast, minimizing the insured's level of liability in the event of a loss is generally more aligned with risk transfer strategies, whereby an organization seeks to limit its exposure through insurance rather than retaining that risk.