What is dealer reinsurance?

Generally speaking, reinsurance exists when a “front insurer” transfers the reserved premium funds on insured risks to a second entity, the “reinsurer.” The reinsurer takes on the risk of claims and retains the underwriting profits when the risk expires; the reinsurer also retains any accrued investment income earned by the reserved funds.

In the Portfolio program, the front insurer is listed on the agreements for vehicle service contracts, warranty, GAP and ancillary products sold to consumers. After the business is remitted by the dealership, the funds reserved to cover claims (“premium reserves”), less fees, are transferred to and held by an affiliated reinsurance company (ARC) closely associated with the dealer. These reserves are used to pay any claims.

The ARC earns any underwriting profits and investment income. Portfolio structures the ARC and profitably manages its month-to-month operations in exchange for a fully disclosed upfront fee. Portfolio does not claim any portion of the ARC’s underwriting profits or investment income.

Portfolio ARCs are considered reinsurance companies and are treated as such under the Internal Revenue Code for federal tax purposes. Many states and other jurisdictions do not classify these companies as “insurance” or “reinsurance” companies. For clarity, these structures are referred to as reinsurance companies throughout this website.

Prospective clients in all 50 U.S. states are eligible for Portfolio reinsurance management services.

Investment control

While you, the reinsurance company owner, will be in control of your company’s investments, your results will be based on your individual choices, business experience and expertise, as well as market conditions and economic realities. Portfolio reinsurance management includes investment policy guidelines that provide prudent bounds for your company’s investments.

Investment performance

There are no guarantees concerning the profitability you may experience. The past performance of Portfolio’s clients is no guarantee of your own results. Portfolio cannot guarantee your company’s future results or success.

Historic performance

Portfolio companies have enjoyed excellent earned loss ratios, healthy investment income returns, and substantial after tax profits since 1990. Dealer/owner control of the reserve accounts and the investments means that you are in control of the profits your company achieves. Portfolio provides the expertise to assist you in achieving your profit goals. Portfolio will share aggregate performance data in the form of historical records dating from 1990 to the present upon request.


The Portfolio program allows dealers to make loans from their reserve accounts as part of a balanced investment portfolio and subject to approval by Portfolio. We take pride in our proper and sophisticated loan management services. Please ask for more details when you contact us.


Two Portfolio program clients were the subject of a two-year, multipronged review by analysts at the Internal Revenue Service’s national office in Washington, D.C. At the conclusion of the examination, the IRS published two Technical Advice Memoranda that showed Portfolio reinsurance companies served a legitimate business purpose in a way that was proper and correct. While Section 6110(k)(3) of the Internal Revenue Code states that TAMs may not be used or cited as precedent, the fact remains that the Portfolio program has undergone extensive review by the IRS and its two clients were found to be in compliance with federal tax law. To Portfolio’s knowledge, no other similar program can claim the same accomplishment.