What is the term for setting aside funds to cover specific risks as an alternative to insurance?

The term for setting aside funds to cover specific risks as an alternative to insurance is self-insurance. This approach involves an individual or entity retaining responsibility for their own risk instead of transferring that risk to an insurance company. In self-insurance, reserve funds are created to handle potential losses, effectively providing a way to mitigate risk without the need for conventional insurance coverage.

This method can be advantageous for organizations that prefer to manage their risks internally and can result in cost savings when they are able to predict and plan for potential losses. It allows for more control over funds and claims processes. The practice of self-insurance is common in various sectors, where the costs of insuring certain risks may exceed the potential losses, or for organizations that want to maintain flexibility regarding how they handle claims.