ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -Avoidance. Retention. Spreading. Loss Prevention and Reduction. Transfer (through Insurance and Contracts) 22-Jun-2022

Detailed explanation-2: -Retention refers to the assumption of risk of loss or damages. This expresses how a party, usually a business, handles or manages its risk. When a business retains risk, they absorb it themselves, as opposed to transferring it to an insurer.

Detailed explanation-3: -Risk-retention is the method secured for all other types of risks, that is, unforeseen or foreseen but not significant. For example, risk of getting a flat tyre while on a long road trip. Although the risk is unknown, it is not as significant and you can easily manage it out of your pocket.

Detailed explanation-4: -There are two types of retention methods for containing losses as under: (i) Active Risk Retention: Where the risk is retained as part of deliberate management strategy after conscious evaluation of possible losses and causes. (ii) Passive Risk Retention: Where risk retention occurred through negligence.

Detailed explanation-5: -Risk retention is the planned acceptance of losses by deductibles, deliberate noninsurance, and loss-sensitive plans where some, but not all, risk is consciously retained rather than transferred.