Texas All Lines Adjuster Practice Test

In risk retention by an insurer, the key concept is that the insurer actively decides to take on a certain level of risk rather than avoiding it. This means that instead of denying coverage or rejecting a policy based on the high-risk nature of a situation, the insurer acknowledges the risk and chooses to cover it.

This approach allows the insurer to maintain a portfolio of policies that might include high-risk coverage, which can be beneficial for both the insurer and the insured. For the insurer, it can lead to increased premiums and potential profitability; for the insured, it provides access to coverage that might otherwise be unavailable.

The other options deal with avoidance of risk rather than retention, suggesting a strategy of denial or elimination, which does not accurately reflect the nature of risk retention.