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risk tolerance

Risk tolerance refers to the willingness of an organization to incur risk to gain future reward.

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In insurance, risk tolerance may be evidenced by a willingness of the insured to increase deductibles or self-insured retentions. Alternative risk transfer is used by insureds with low risk tolerance and the corresponding desire to reduce the uncertainty arising from purchase of commercial insurance. Compare to Retention Ability.

Related Terms

Retention ability is the amount of aggregate incurred losses that an insured can retain in any one...