Let me explain why I don't see any major issue with how the retaliation works.
Retaliation can be very powerful, it's especially useful against squeshy high dmg enemies.
Combined with LoneWolf I can see some of them even killing themself with 1hit.
On the flipside you have encounters where retaliations makes fights harder.
Like the one described earlier.
And now to the important point, I don't think that any fight will be unwinnable with a full retaliation build.
If that's not the case than I agree it needs to be changed.
However you might will be forced to use some spells/skills to deal dmg in certain situations.
