Portfolio dealers have their rights of ownership, but that does not mean anything goes. Reinsurance companies must be managed and operated to be proper and correct, and in compliance with Federal regulations and tax laws.
Portfolio reinsurance companies are loyal US taxpayers. There is no off-shoring of funds or risk. Our companies have a legitimate business purpose, and are a superior way to create a win-win-win situation for 1) the dealership's customers, 2) the dealership as a business, and 3) the dealer as owner.
For these and other reasons, the IRS issued two favorable Technical Advice Memoranda after an extremely expensive and thoroughgoing two-year review of Portfolio-managed reinsurance companies. We paid the high cost of complying with the IRS inquiry because we believe in our business concept, its value to dealers, and because we have always made every effort to be proper and correct.
The TAMs appear to be a general guideline. So since the release of these TAMs many companies have started offering reinsurance programs to dealers. The perception is that any kind of reinsurance company would survive a similar investigation. Having directly witnessed everything the IRS scrutinized, and having seen how other providers operate, we would urge caution when shopping for a reinsurance program. More on the TAMs