One of the downsides of using retention exclusively for loss exposures is?

Using retention exclusively for loss exposures can lead to significant financial risks, which is encapsulated in the potential for financial ruin. Retention involves assuming responsibility for the entirety or a portion of potential losses rather than transferring that risk to an insurance company. While this can be a viable strategy for managing small, predictable losses, it can become dangerous when a significant or catastrophic loss occurs.

When a business or individual retains too much risk without adequate financial resources to cover large losses, they face the possibility of becoming financially overwhelmed. This situation could lead to insolvency or bankruptcy, especially if multiple large claims occur in a short time frame. Maintaining a robust financial reserve can mitigate this risk, but without proper financial planning or the ability to absorb unexpected losses, the consequences can be severe.

The other options touch on aspects related to risk management, such as the difficulty in estimating risks, insurance policy complexity, and market conditions, but they do not directly address the immediate financial implications of retaining liability. Those factors can complicate risk management strategies, but the most pressing downside of relying solely on retention is the severe financial impact it can have during significant loss events.