Risk Retention Strategies for Professional Services

This guide discusses various risk retention strategies applicable to professional service firms, focusing on optimizing insurance coverage in a challenging market. It outlines different types of retention, including self-insured retention (SIR), deductibles, aggregate retention, coinsurance, and excess layer retention. The document explains how each retention type functions and its implications for insurance negotiations based on a firm's risk profile. For instance, SIR requires the insured to cover losses up to a specified amount before insurance kicks in, while deductibles are subtracted from the policy limits. The guide also details how aggregate retention is triggered by cumulative losses and how coinsurance allows firms to share risk with insurers. Furthermore, it highlights the challenges of excess layer retention in cases of high loss frequency and severity. The document emphasizes the importance of aligning retention strategies with the organization's risk appetite and loss history to effectively manage insurance costs.