What is one potential risk that policyholders assume in risk retention?

In risk retention, policyholders choose to retain a portion of the risk rather than transferring it entirely to an insurance company. This means that they accept responsibility for covering certain losses themselves. The financial burden incurred when losses occur becomes a direct cost to the policyholder. For instance, if their deductible is high or they opt for minimal coverage to save on premiums, they will need to pay out of pocket for any claims that fall within that retained risk. This approach can lead to significant expenses if unforeseen events happen, as the policyholder is not only responsible for minor losses but could also face substantial financial implications from larger claims.

The other options refer to different concepts. Increased premium payments for additional coverage does not directly relate to risk retention, as this option tends to be more about the cost of increasing transferred risk. The impact on the insurance company's solvency pertains to how claims affect the insurer but does not involve the policyholder’s assumed liability. Loss of coverage during high-risk periods may refer to policy limitations but does not encapsulate the core aspect of self-insurance that is inherent to risk retention.