F&I Reinsurance Glossary

 The amount paid by customers for F&I products such as Vehicle Service Contracts (VSC), GAP, and tire & wheel. A portion is ceded to the reinsurance company, Net of any packs at the dealership level or loan repayments if applicable.

 Payments made for covered repairs or services. High claims can reduce the company's underwriting profit. Expenses associated with the claim, such as third-party inspections if applicable, are included in this line item.

 A recurring report detailing the flow of premiums, reserves, fees, and claims between the administrator and the reinsurance company.  This is where you will find MTD, QTD, YTD, and ITD KPIs.

The transfer of risk and premium from the dealership to the reinsurance company. It allows dealers to participate in underwriting profits and investment income from the reserves.

Funds held to cover future claim obligations. Adequate reserving ensures long-term solvency and stability.

A key performance metric:

Loss Ratio = Claims Paid ÷ Earned Premium

Lower ratios generally indicate better profitability.

What remains after claims and contractual fees are paid. This is the primary source of profit for the reinsurance company.

Investment Income

Earnings are generated by investing reserve and surplus funds. This can meaningfully boost long-term returns.

Earnings are generated by investing reserve and surplus funds. This can meaningfully boost long-term returns.

The accumulated profit in the reinsurance company after claims and expenses. It represents the owner's equity.

A third-party entity that manages product development, contract servicing, and claims adjudication on behalf of the dealership.

A dedicated account (often managed by a trustee) where reserves and premiums are held. Ensures transparency and compliance.

The contract outlines the dealer's participation in the reinsurance structure, including risk allocation, profit sharing, and administrative fees.

The portion of a contract's premium that has been "used up" as time passes. It becomes recognized revenue.

The portion of the premium reserved for future coverage. It remains a liability until earned.

 A privately owned reinsurance company set up by a dealership or group to insure its own F&I products.

The legal jurisdiction in which the reinsurance company is licensed and regulated (e.g., Turks and Caicos, Montana, North Carolina, Tribal Domicile).

A structure where the reinsurance company assumes a set percentage of both premiums and losses, often 100%.  A Quota Share can be a percentage of business ceded to different reinsurance companies to accommodate partners, key employees, or family members.

The withdrawal of profits from the reinsurance company, typically in the form of dividends or loans.  Seek tax advice for your best option to consider.

Retrospectives (Retros) are not reinsurance companies, but rather income paid annually to the dealership as underwriting profit and, in some cases, investment income is generated.

Reserves are held in the event a dealer exits the program. Ensures outstanding claims and liabilities are paid.  Termination clauses may outline forfeiture of any additional participation in the runoff in a retrospective account.  

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