Dealer Participation Programs: Reinsurance Plans
Ownership of a reinsurance company allows the dealer the ability to capitalize on the backend income opportunities from the sale of service contracts and other related products through participation in underwriting profit and investment income. In addition, Coffeen Management Company’s comprehensive reporting includes risk analysis, detailed financial statements, and performance reviews for all producer-owned reinsurance programs.
Controlled Foreign Corporation (CFC)
For the dealer seeking underwriting investment return as well as flexibility through control, reinsuring the vehicle service contracts and other related products through a Controlled Foreign Corporation (CFC) is a beneficial investment option. It enables the dealer to earn a profit from the sale of the product(s) on the retail side while additionally participating in the underwriting experience. The distinct advantage to this approach involves the ownership and control of the company as well as the investment income generated by the company’s assets, which reside with the dealer client/agent company.
Non-Controlled Foreign Corporation (NCFC)
For the dealer producing significant volumes of vehicle service contracts, participation in a Non-Controlled Foreign Corporation (NCFC) offers another means of generating underwriting profit. In a NCFC, the dealer owns stock in an offshore reinsurance company with up to 9 other participants; however, the dealer’s position is siloed and protected. The advantage in utilizing this type of underwriting vehicle is the capacity to produce better long-term economic benefits. Furthermore, the NCFC offers a monthly ceding methodology that accelerates investment potential.
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