Retention in insurance means:

Retention in insurance refers to the strategy of maintaining responsibility for a potential loss by not purchasing insurance coverage for that specific risk. This approach can be intentional, where an individual or organization decides to accept the financial consequences of a specific risk instead of transferring that risk to an insurer. For businesses, this could mean self-funding certain types of losses, often used in conjunction with risk management practices to keep insurance premiums lower.

Utilizing retention can be beneficial in cases where the likelihood or potential impact of a loss is assessed to be low, or where the cost of insurance exceeds the potential financial benefit. This strategy allows entities to allocate resources to other areas rather than spending on insurance that may not offer significant value based on their risk profile.