Final answer:
Self-insuring means a firm retains risks within the company by setting aside funds to cover potential losses, acting as its own insurer.
Step-by-step explanation:
When a firm is self-insuring its risks, it means that the firm is retaining risks within the company. Instead of transferring risks to an insurance company, the firm sets aside a reserve of funds to cover potential future losses. This approach can be more cost-effective for managing certain types of risk, especially if the firm believes that the costs of insuring through an external provider are too high relative to the risks encountered. However, self-insurance requires careful management and a solid understanding of the firm's risk profile. By self-insuring, a company essentially acts as its own insurer, which involves assessing and managing the potential risks internally.