This policy setting controls Event Log behavior when the log file reaches its maximum size. If you enable this policy setting and a log file reaches its maximum size new events are not written to the log and are lost. If you disable or do not configure this policy setting and a log file reaches its maximum size new events overwrite old events. Note: Old events may or may not be retained according to the “Backup log automatically when full” policy setting.
Control Event Log behavior when the log file reaches its maximum size
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HKEY_LOCAL_MACHINE -> Software -> Policies -> Microsoft -> Windows -> EventLog -> System # Retention
Windows Components -> Event Log Service -> System