Reinsurance & Retro Programs

Your dealership is unique and so are your dealership’s needs. That is why Dealership Development offers different vehicle service contract profit-participation solutions that can be customized for every dealer. As you review the vehicle service contract programs below, remember they are “ Administrator Obligor ” and are “ Fully Insured ” by an A-rated insurance company.

Since Dealership Development’s inception in 1989, we have assisted dealers in earning and retaining millions of dollars in underwriting profits, either through reinsurance companies or vehicle service contract “Retro” programs.

By utilizing Dealership Development’s vehicle service contract profit-participation solutions, our clients are better positioned to build wealth over the long term.

Forming a producer-owned reinsurance company (P.O.R.C.) allows you, the dealer, to retain all of the underwriting profits and investment income that your dealership generates each year instead of giving it all away to your current vehicle service contract company. It also allows favorable tax benefits on these profits.

A dealer or producer-owned reinsurance company (P.O.R.C.) is a standalone corporation. It is a C Corporation referred to by the IRS as IRC section 831(b). It is completely separate from your dealership. This company will form a trust account for the purpose of accepting premiums and paying claims.

These premiums will be Fully Insured by an A-rated insurance company, creating an “arm’s length” transaction. This insurance company is also known as a “fronting” insurance company. The insurance will be in place for the duration of the term for every vehicle service contract. If claims exceed reserves, the “fronting” insurance company is responsible for paying any claims beyond the reserves.

As unlikely as that may be, this is an important safety net for the dealer and the customer. The insurer bears the risk.

This “Administrator Obligor” dealer-owned reinsurance company is considered a small property and casualty company by the IRS. As long as annual premiums stay below $1,200,000, this company will be taxed on its investment income only.

This will be a “turnkey” vehicle service contract transaction. You will pay an administrative fee and an insuring fee per policy to an established vehicle service contract Administrator Obligor to administer all claims on a nationwide basis.

A Retrospective, or “Retro,” Program allows a dealer to participate in most of the underwriting profits and investment income (sometimes 100%) without taking on any risk.

The amount of participation in these profits will be dictated by the volume of vehicle service contracts sold and the underwriting profits the dealer’s business produces.

The dealer will receive a check for these profits at the end of each year.