The Complete Guide to Automotive Reinsurance for Dealerships

As dealerships continue to evolve their F&I strategy, more principals and general managers are exploring dealer reinsurance not just as a profit tool but as a long-term wealth-building strategy. One of the most powerful tax advantages available within reinsurance is the 831(b) election, a provision in the U.S. tax code that allows qualifying insurance companies to be taxed only on their investment income, not the premiums they collect, up to a defined annual limit. For the 2025 tax year, the IRS has set the 831(b) premium cap at $2.85 million. This means that if your dealer-owned reinsurance company collects less than that amount in premium and meets certain compliance standards, it may qualify for this election. The relevant IRS language reads: “In the case of a qualifying insurance company, if the net written premiums (or, if greater, direct written premiums) for the taxable year do not exceed $2,850,000, the taxable income of the company shall be taxable only on income other th...

Introduction: Why I Believe F&I Reinsurance Matters for Dealers Over the years, I have seen firsthand how F&I reinsurance can transform a dealership. What begins as a profit center in the finance office can become a long-term wealth engine when dealers take ownership of the underwriting profits from their F&I products. The key is understanding the different structures available and knowing which one fits your dealership’s size, goals, and future ambitions. Retro Profit Sharing Programs For many dealers I have worked with, retro profit sharing is the first step into profit participation. A retro program allows you to share in underwriting profits without having to form your own reinsurance company. It does not require upfront investment, which makes it a great introduction. While it is not as lucrative as other structures, it helps dealers start to see beyond just the monthly profit and toward long term potential. Controlled Foreign Corporation (CFC) A Controlled Foreign Co...