In the fast-paced world of powersports retail—where motorcycles, ATVs, UTVs, and personal watercraft sell as much for lifestyle as for function—dealers are always looking for new ways to increase profitability and long-term stability. Beyond vehicle sales, one of the most lucrative opportunities lies in Finance & Insurance (F&I) products, such as extended warranties, GAP coverage, and tire and wheel protection. However, most dealers don’t realize they can go beyond selling these products—they can actually own the underwriting profits through a powersports reinsurance program.
A powersports reinsurance program allows dealers to set up their own reinsurance company that “reinsures” the F&I products they sell. This means the dealer is no longer just collecting commissions but is now capturing underwriting profit and investment income on every contract sold. For dealers with high F&I volume, the financial potential is substantial.
How It Works
When a dealership sells an F&I product—like a vehicle service contract—that product is typically backed by a warranty administrator and an insurance company. In a reinsurance structure, instead of allowing the insurance company to retain the underwriting profits, the dealer forms a reinsurance company that assumes the risk and collects the unearned premium over time. This reinsurance company is often set up as a Controlled Foreign Corporation (CFC) or Non-Controlled Foreign Corporation (NCFC), depending on the dealer’s goals and financial strategy.
Funds from premiums go into the reinsurance account, where they are held to pay claims. Whatever isn’t used for claims or fees becomes profit for the dealer’s reinsurance company. Over time, that reserve grows into a significant asset.
Key Benefits for Dealers
- Increased Profitabilit
Reinsurance captures profits that would otherwise go to outside insurance companies. Dealers can significantly increase their earnings per contract sold. - Tax Advantages
Many reinsurance programs are structured to take advantage of favorable tax treatment, allowing dealers to defer taxes or reduce their overall tax liability. - Asset Building
Over time, a reinsurance company builds reserves that can be invested or accessed later. For many dealers, this becomes a valuable long-term asset or retirement tool. - Greater Control
With reinsurance, dealers have more say in product pricing, claims handling, and reserve management—leading to better customer service and a stronger brand reputation. - Business Stability
By diversifying income beyond vehicle sales, reinsurance adds resilience to a dealer’s business model, especially during seasonal or economic fluctuations.
Is It Right for Your Dealership?
A powersports reinsurance program is best suited for dealerships that consistently sell a high volume of F&I products and are ready to take a more sophisticated financial step. While setup requires legal and administrative guidance, many providers offer turnkey solutions to make the process simple.
In Summary
For forward-thinking powersports dealers, a reinsurance program is more than a financial tool—it’s a strategic move toward long-term wealth creation and business sustainability. If you’re already selling service contracts and other F&I products, it might be time to consider not just selling the risk—but owning it.
