What are the main dealer reinsurance structures?
The main dealer reinsurance structures are Retro profit participation, the Controlled Foreign Corporation (CFC), the Super CFC, the Non Controlled Foreign Corporation (NCFC), and the Dealer Owned Warranty Company (DOWC). They differ in ownership, control, tax and accounting treatment, complexity, and the dealer profile they fit.
What is the difference between Retro and reinsurance?
A Retro program is a profit participation agreement in which the administrator keeps the underwriting risk and the dealer shares in profitability after claims, with no entity to form. A full reinsurance structure such as a CFC, Super CFC, NCFC, or DOWC means the dealer owns or co owns the company that assumes the risk and holds the reserves. Retro is participation by agreement; reinsurance is participation by ownership.
What is CFC reinsurance?
A CFC is a Controlled Foreign Corporation the dealer owns and controls, often using a Section 831(b) tax election. It is the traditional first captive most mid volume dealers start with when they want ownership of their F&I underwriting profit and the investment income on their reserves.
What is Super CFC reinsurance?
A Super CFC is an advanced CFC that uses retail cost accounting to remove the annual premium cap. It suits high volume dealers and groups who have outgrown a standard CFC and want to keep reinsuring all of their production while keeping dealer control.
What is NCFC reinsurance?
An NCFC is a Non Controlled Foreign Corporation owned collaboratively by several participants, structured so no single owner controls it. It lets dealer groups pool premium and diversify risk across a larger book, with a different ownership and tax profile than a controlled captive.
What is a Dealer Owned Warranty Company?
A DOWC is a domestic operating company the dealer owns that issues its own branded warranty product instead of reinsuring someone else’s. It offers the most control and the strongest long term enterprise value, in exchange for more capital, licensing, and administration.
Which reinsurance structure is best for a dealership?
There is no single best dealer reinsurance structure. The right fit depends on volume, number of rooftops, product mix, desired control, risk tolerance, cash flow needs, tax and accounting strategy, and long term goals. The honest answer comes from a pro forma built on your actual production, reviewed with qualified tax, legal, accounting, and reinsurance professionals.
Can independent dealers use reinsurance structures?
Yes. Reinsurance is defined by F&I production and ownership goals, not franchise status. Independent, franchise, powersports, RV, and marine dealers can all participate. The right structure depends far more on volume and goals than on the kind of units sold.
What products can be included in dealer reinsurance?
Common products include vehicle service contracts, GAP, tire and wheel, key replacement, appearance protection, theft protection, prepaid maintenance, and other ancillary F&I products. Stable lines such as service contracts are the core of most programs, and product mix is chosen deliberately because it affects claims and reserves.
Does the structure affect profitability?
The structure sets the ceiling on how much a dealer can participate and how the economics are taxed and held, so it matters. But it does not guarantee a result on its own. Long term profitability also depends on product selection, pricing, claims experience, reserve management, and execution at the desk.
How do I compare my current reinsurance program?
Start with a side by side review of your current structure against the alternatives on your real numbers, including fees, reserves, investment income, and projected long term returns. Elite FI Partners builds that comparison and a pro forma so you can see how your current program stacks up before making a change.
How does Elite FI Partners help dealers choose a structure?
We act as advisors, not just a product provider. We review your current program, compare structures on your real numbers, evaluate providers and administrators, analyze product mix, build a pro forma, support training and implementation, and track performance over time, so the structure you choose is the one your dealership should actually be in.