Loss amount the insured keeps before the insurer's obligation attaches.
A self-insured retention, often shortened to SIR, is an amount the insured must fund and often manage before the insurer’s payment obligation begins under the policy wording.
This term matters because it can look similar to a deductible while operating very differently in claims handling, cash flow, and commercial insurance program design.
In Canadian commercial and specialty insurance, a self-insured retention is often used where the insured is expected to absorb the first layer of loss and sometimes handle or fund defence and claim costs within that retained layer. The insurer’s obligation may begin only after the retention has been exhausted in the way the policy specifies.
This structure is common where the insured has the size or sophistication to retain more predictable losses while still buying insurance for more severe outcomes.
| Question | Deductible | Self-insured retention |
|---|---|---|
| When does the insurer’s payment duty typically engage? | Often the insurer still adjusts and pays the covered loss subject to the deductible logic | The insurer’s duty may not attach until the retained layer has actually been satisfied |
| Can claims handling and defence be affected? | Usually less dramatically | Often yes, especially in liability and specialty structures |
| Why is it used? | To keep part of each covered loss with the insured | To create a more deliberate retained layer before the insurance program attaches |
A company carries liability coverage with a CAD 100,000 self-insured retention. A covered claim costs CAD 70,000 to resolve. The company absorbs that amount itself. If a later claim costs CAD 300,000, the company may pay the first CAD 100,000 and the insurer may respond above that layer according to the policy.
That means the SIR affects more than arithmetic. It can shape how quickly the insurer becomes operationally involved, who is funding the early defence or settlement layer, and how the insured manages smaller claims that stay inside the retention.
A self-insured retention is not automatically the same as a deductible. With a deductible, the insurer often pays the covered claim and then applies the deductible logic. With an SIR, the insurer’s duty may not attach until the retained amount has actually been satisfied.
It is also not just a casual uninsured amount. The structure is contractual and tied to claims administration and attachment wording.
Readers also sometimes assume SIR only matters in very large corporate programs. While it is more common in sophisticated commercial structures, the underlying logic still matters whenever the policy says the insured’s retained layer must be satisfied before the insurer’s obligation begins.
Readers should check who controls defence, who reports claims, and what costs count toward exhausting the retention. Those details can materially change how the program behaves in practice.