What are self-insurance and risk transfer? What will be an ideal resp

QUESTION

What are self-insurance and risk transfer?

What will be an ideal response?

ANSWER

Answer: Self-insurance is the practice in which a company sets aside money to cover losses with its own funds. Risk transfer is the practice whereby a company transfers its risk to an insurance company in return for a fee.
Explanation: Most companies supplement their self-insurance with special insurance policies (“catastrophic” policies) to cover large losses.