Self-insurers are businesses that are financially able to self fund certain risks by setting aside funds to pay claims. Which description best fits self-insurers?

• A. Funds its own losses with a dedicated reserve
• B. Buys all risk coverage from external insurers
• C. Only sells property insurance on a group basis
• D. Is regulated as a government agency

Answer: (A)

Self-insurance is a risk financing approach where a business keeps and pays for its own losses rather than buying insurance to cover them. It does this by setting aside a dedicated reserve to cover anticipated claims, which is exactly described by funds its own losses with a dedicated reserve. In practice, a self‑insured program may also use stop-loss or reinsurance to protect against catastrophic claims, but the fundamental idea is retention of risk and paying claims from reserves on the company’s books.

The other choices describe transferring all risk to external insurers, limiting coverage to a specific line of business, or being a government agency, none of which capture the idea of retaining and funding losses internally.