What is defined as a risk management technique where an entity retains risks and pays for losses directly?

Self-insurance is defined as a risk management technique where an entity chooses to retain risks rather than transferring them to an insurance carrier. In self-insurance, the entity sets aside its own funds to cover potential losses directly, rather than purchasing insurance that would cover those losses. This approach is often taken by businesses or organizations that feel confident in their ability to manage risk and predict losses, allowing them to save on insurance premiums while still being prepared for financial impacts.

In contrast, the other options pertain to transferring risk rather than retaining it. Third-party insurance involves purchasing coverage from an insurer, which means the risk is transferred to that insurer. Group insurance typically refers to policies that cover a group of individuals, often provided as employee benefits, where the risk is spread across many participants. Indemnity insurance, while it can be related to certain types of coverage, generally refers to policies that compensate for loses, which does not align with the concept of retaining risk as in self-insurance. Thus, self-insurance is the correct answer as it directly defines the act of retaining risks and paying for losses directly.