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22 CHAPTER SIX RISK RETENTION SELF-INSURANCE Large airport operator respondents indicated that they are self-insured for property, liability, and workers' com- The survey asked respondents to state whether any portion pensation coverage lines. Four medium airport operator of their insurance portfolio was self-insured. The survey did respondents are self-insured for workers' compensation, two not specifically define self-insurance, but the question was reported self-insuring property, and two self-insure general phrased to specify the use of a large self-insured retention at liability coverage lines. Although no small airport operator the primary insurance level with excess insurance above the respondents reported retaining risks on primary coverage retained amount. Self-insurance involves a formal decision lines, one small airport operator indicated that its facility is to retain risk rather than insure it and is distinguished from self-insured for auto collision. noninsurance or retention of risks through deductibles by a formalized plan or system to pay losses as they occur (Inter- In general, small airport operators do not self-insure national Risk Management Institute 2010). risks and medium airport operators tend to retain work- ers' compensation risks. Large airport operators self-insure Nine of the 19 survey respondents indicated that their more lines of coverage including property, liability, and facility is self-insured for primary lines of insurance. All workers' compensation. Most likely, this is the result of large airport operator respondents confirmed that some greater revenues, larger operating budgets, and the exis- primary lines are self-insured. Medium airport operator tence of personnel well versed in risk management meth- respondents are split: three self-insured and three insured by odology and capable of assessment and implementation of traditional coverage. Conversely, no small airport operators more complex risk-financing strategies at their respective reported being self-insured for primary lines of coverage. large airport facilities. The size of the airport is directly correlated to whether the facility tends to be self-insured for any lines of insur- WHAT COMPELS AN AIRPORT OPERATOR TO SELF- ance. Larger airport operators are self-insured for one or INSURE? more lines of insurance, whereas small airport operators do not retain risk. Of the 11 airport operators that self-insure at least one line of coverage, eight indicated that a costbenefit analy- Eight of 19 airport operators indicated they are self- sis prompted the decision to retain risks. Four respondents insured for workers' compensation, and six of 19 self-insure indicated a strong appetite to retain risk within their facility. for property and six for general liability lines (see Figure 6). Other explanations for the decision to self-insure include the ability to control claims and manage claims costs, as well as affordability of self-insurance as compared with costs of traditional coverage. Among large airport facilities, costbenefit analysis is the primary factor in the decision to self-insure. Affordability and the desire to retain risk also rank on large airport opera- tors' lists of reasons to self-insure. Motivation for medium airport operator self-insurance varies. Medium airport operator respondents cited fac- tors such as costbenefit analysis, appetite for risk, cost management, better claims administration, and decision FIGURE 6 Number of airport operators reporting self- of the facility's risk manager as prompting the decision to insurance by line. self-insure.