The spectrum from participation to ownership
The structures form a spectrum. At one end, retrospective (retro) programs return a share of results with little setup and little ownership. At the other end, a dealer owned warranty company (DOWC) gives the most domestic control and ownership, with more administrative responsibility. Controlled foreign corporations (CFC), Super CFC arrangements, and non controlled foreign corporations (NCFC) sit in between with different ownership, control, and tax characteristics.
How to think about the trade offs
More ownership generally means more potential participation in underwriting profit and investment income, along with more responsibility and more attention to compliance. The right structure depends on a dealer’s volume, risk tolerance, tax situation, and long term goals. There is no single best structure for every store.
Because the choice interacts with taxation and regulation, it should be made with qualified tax and legal advisors. This page explains the concepts so a dealer can have a more informed conversation, not to substitute for that advice.
Where structure meets performance
Structure sets the framework, but day to day performance still depends on product selection, claims experience, reserving, and fees. A strong structure with a poor product mix can underperform a simpler structure that is managed well.