Active Retention is defined as?

Active Retention is defined as?

• A. Unaware you are engaging in retention.
• B. Deliberate decision to practice retention.
• C. Deliberate funding of a reserve for losses.
• D. Pay as losses occur.

Answer: (B)

Active retention means making a conscious, intentional choice to keep and manage certain risks inside the organization rather than transferring them to an insurer or another party. The defining point is the deliberate decision to retain risk and to plan for its financial impact. That’s why this option is the best: it focuses on the intentional, ongoing choice to practice retention. If you were unaware you were retaining risk, that would be passive retention. While funding a reserve can be part of how you implement active retention, the essential idea is the deliberate decision to retain risk, not merely the act of setting aside money. Paying losses as they occur describes a reactive approach and isn’t the core of actively choosing to retain risk.

Active retention means making a conscious, intentional choice to keep and manage certain risks inside the organization rather than transferring them to an insurer or another party. The defining point is the deliberate decision to retain risk and to plan for its financial impact.

That’s why this option is the best: it focuses on the intentional, ongoing choice to practice retention. If you were unaware you were retaining risk, that would be passive retention. While funding a reserve can be part of how you implement active retention, the essential idea is the deliberate decision to retain risk, not merely the act of setting aside money. Paying losses as they occur describes a reactive approach and isn’t the core of actively choosing to retain risk.