F&I Reinsurance Glossary

Payments made to cover repairs or services outlined in the contract. Claims reduce the underwriting profit of the reinsurance company.   Sometimes, inspection costs are added to this line item.

The amount paid by a customer for a vehicle protection product (e.g., VSC, GAP, tire & wheel). A portion of this is ceded to the reinsurance company. 

A monthly or quarterly report showing the transfer of premiums, claims, reserves, and fees between the administrator and the reinsurance company 

The act of transferring the insurance risk and associated premium from the seller (e.g., the dealership) to the reinsurer (captive). 

Funds are set aside within the reinsurance company to pay future claims. Proper reserving ensures the company can meet its financial obligations. 

A key performance metric: Claims Paid ÷ Earned Premium. A lower loss ratio generally indicates higher profitability. 

The remaining funds after claims and fees are paid. This represents the core profit of the reinsurance company, excluding investment income and taxes. 

Earnings are generated from investing the assets (mostly unearned premiums and reserves) of the reinsurance company. 

The accumulated profit in the reinsurance company after all liabilities are accounted for. This is the owner's equity in the company. 

A third-party company that handles product development, claims adjudication, and reporting for F&I products. 

A legal contract between the dealer and the administrator or insurance carrier that defines how the reinsurance arrangement works. 

A segregated account where premiums and reserves are held, typically managed by a trustee, to comply with regulatory or contractual requirements. 

The portion of the premium that corresponds to the expired part of the coverage period. It’s recognized as revenue. 

The portion of the premium still covering the future period of the contract. Held as a liability until earned. 

The jurisdiction (e.g., Turks & Caicos (Foreign), Domestic, State - AL, MT, NC, Tribal Domicile) in which the reinsurance company is licensed and regulated. 

A reinsurance agreement where the reinsurer assumes a fixed percentage of all premiums and losses.   Multiple companies used to split production between owners and key stakeholders.

A privately held insurance company created by the dealer or group to reinsure their own F&I products.

A financial summary showing the profitability of a dealer’s retro program, including earned premiums, claims, expenses, and surplus.  Retros are a participation program, not a reinsurance company.  Profits from these programs are typically paid out on an annual basis.

The withdrawal of profits from a reinsurance company, typically in the form of dividends or loans, is often subject to taxation and domicile rules.