Comparing programs, answered.
How do I compare two dealer reinsurance programs?
Hold your dealership production constant and apply each program’s own terms — fees, claims assumptions, reserve and capital requirements, investment and distribution rules — to the same projected book. Then compare not just the headline total value but the net new value each program creates during the period, how quickly cash reaches you, and the structural and contractual differences. This tool does exactly that, and it deliberately never declares a winner.
What fees should be included in a reinsurance comparison?
Administration (per contract), ceding and management fees (percent of remittance), trust fees, investment management fees, and the fixed professional costs — accounting, legal, tax preparation, and actuarial or consulting — plus any setup or conversion expense and any other per-contract or percentage-based fee. Combining everything into one number hides where a difference actually comes from, so this tool breaks the fee difference out category by category.
Why should existing reserves be separated from new value?
A program that has been running for years may already hold a large reserve. That balance is the dealer’s pre-existing money, not value the program creates going forward. If you compare total balances, an established program can look better simply because it started with more. Separating net new value created during the projection — excluding existing reserves, transferred assets, and new capital — is the only apples-to-apples way to compare how the two programs perform from here.
Does a larger reserve balance mean a program performs better?
No. A larger reserve can reflect history, contributed capital, or a slower distribution policy rather than superior performance. What matters going forward is the net new value each structure creates on the same production, how much capital it ties up, and how and when you can access it. This tool shows total value and net new value side by side for exactly this reason.
How do investment returns affect reinsurance?
Reserves that are invested can earn a return, which compounds retained value over time — but only on the investable portion, net of any investment management fee, and only when funds are not restricted as collateral or minimum cash. Small differences in the assumed return compound, so the tool lets you test different return assumptions and shows the break-even return at which the two programs converge.
What happens to reserves when changing programs?
It depends entirely on the agreements. Some reserves are portable and can transfer to a new structure; others must run off with the current provider while open claims are paid. Transfers may carry fees, and new production may not enter the proposed program immediately. The transition model in this tool illustrates a simplified runoff and startup and never assumes all reserves are instantly portable.
Can reinsurance reserves be transferred?
Sometimes, in part, and subject to the contract — not automatically. The transition feature lets you model an amount transferred (seeding the proposed program) while the remainder runs off with the current provider, with transfer, termination, and conversion costs applied. The transferred amount is conserved: removed from the current program and added to the proposed one, never counted twice.
What is a runoff period?
When a dealer stops sending new business to a program, the existing book “runs off” — open claims continue to be paid and reserves are released over time until the obligations are settled. During runoff the program may still charge administration or runoff fees and may still make distributions. Modeling runoff matters because value can remain tied up for a period after the switch.
How should capital contributions be treated?
As the dealer’s own money, not as earnings. Initial capital, capital calls, existing reserves, and transferred assets all seed or support the structure but are not value the program created. This tool tracks them separately and excludes them from net new value so a program never looks more productive simply because the dealer put in more money.
What documents are needed for a complete comparison?
A complete fee schedule, the participation or reinsurance agreement, recent reserve statements, historical claims data, the distribution and approval rules, capital and collateral requirements, termination and runoff provisions, and the tax and legal structure. The tool generates a due-diligence checklist of exactly these items so you know what to request before relying on any comparison.