When a motor carrier strategizes how to manage its risks, one of the focuses is on preventing and mitigating potential losses. However, part of this planning may also involve deciding which risks they are willing to retain versus those they will seek to transfer (e.g., insurance). Retained losses can directly impact a motor carrier鈥檚 financial health and resilience. This type of loss represents the last topic in our four-part series on the total cost of risk.
WHAT ARE RETAINED LOSSES?
When an incident occurs, such as a vehicle accident, retained losses are the portion of a motor carrier鈥檚 loss that is not transferred to insurance or other risk transfer mechanisms. Instead, these losses are retained or absorbed by the motor carrier, typically through reserves, cash flow, or other internal financial resources. In other words, retained losses represent the cost a motor carrier decides to bear on its own rather than outsourcing that risk to an insurance provider or other risk-sharing entity.
