How are insurance losses regarded under passive retention?

In the context of passive retention, insurance losses are recognized as accepted when a risk has either not been identified or no actions have been taken to address it. Passive retention refers to a strategy where individuals or organizations choose not to take protective measures against certain risks, resulting in the acceptance of potential losses associated with those risks. This could occur due to various reasons, such as a lack of resources, unawareness of the risk, or a belief that the potential loss is minor and manageable.

This concept contrasts with active retention, where proactive strategies are implemented to mitigate risks or minimize potential losses. In passive retention, the absence of such strategies signifies a reliance on the assumption that risks will not materialize or that losses can be managed when they occur. This can often lead to unanticipated consequences if significant losses do arise from overlooked risks.