What type of risk financing is being used when an individual hopes to pay claims through a line of credit while starting a business?

The situation described involves an individual using a line of credit to fund potential claims arising from their business, which indicates a proactive approach to handling risks. In this context, active retention refers to retaining the risk with a conscious decision to manage it. By utilizing a line of credit, the individual demonstrates that they are aware of the risk and have plans in place to manage potential claims as they arise, rather than ignoring the risk or assuming it without preparation.

Active retention contrasts with passive retention, where risks are simply accepted without active management or planning. Since the individual is taking deliberate steps to finance potential claims while launching their business, this approach clearly aligns with the principles of active retention.