CONTROLLED FOREIGN CORPORATION (CFC)
The most common type of reinsurance we come across today. Most of them are currently being domiciled in Turks and Caicos. The quality of the programs depend on the administrator chosen. Key factors to look for include investment manager selection, access to earned and unearned premium, and of course fees. Good for dealerships selling at least 25 VSCs per month but not exceeding $2.3 million in annual premium.
DEALER OWNED WARRANTY COMPANY (DOWC)
The DOWC has created a buzz in the industry the past few years. There is significant misinformation and speculation among agents and administrators because so few people have the expertise to have an intelligent discussion on the topic. The structure has been around for about 40 years and can be an incredibly powerful tool but it is not the right fit for all dealerships.
RETRO
Retrospective commission plans are suited for “higher risk” business, such as service contracts for high mileage vehicles. Retros are also appropriate for companies writing “minimal” monthly contracts, typically between 10 and 20 VSCs per month. The dealership will receive a “commission” on the performance of the book of business.
NON-CONTROLLED FOREIGN CORPORATION (NCFC)
The Tax Cut and Jobs Act of 2017 made this vehicle incredibly risky in our opinion. Once a fixture among U.S. dealers, NCFCs can be potentially unfavorable in light of the changes to rules governing passive foreign investment companies (PFIC).
