Larger businesses often have sufficient risk exposures to enable them to establish an internal self-insurance pool. Generally, this strategy is coupled with purchase of explicit catastrophic insurance protection to absorb any losses exceeding the company's target retention limit. Of course, risk retention makes an effective risk management strategy all the more important to the company, since it ultimately bears the costs. One disadvantage of the retention approach is lack of an insurer's expertise in establishing reserves to cover losses and servicing of claims, but these can generally be purchased from insurers as stand-alone services. This option is often utilised by businesses who self-insure the costs of medical benefits for their employees, yet hire a traditional insurer to handle the administrative tasks involved in processing claims.
Many businesses prefer the control risk retention confers in the claims litigation process.
Such decisions would otherwise be solely at the discretion of the indemnifying insurer, whose interests in settling are not always aligned with those of the insured. Some businesses with extensive operational risk exposures have opted to bypass the primary insurance market entirely, and place their risks directly with the international reinsurance market. The development of a new class of tools for risk securitisation means such companies may ultimately be able to circumvent even the traditional reinsurance markets. One such device is the catastrophic bond which, depending on the particulars of the offering, places either the interest or the principal at risk, in the event of a stipulated catastrophe. Although these tools have been used primarily by insurers as an alternative to reinsurance in shedding their hurricane or earthquake risk exposures, as the market matures it will likely become increasingly attractive to businesses wishing directly to shift their own operational risks.