Powersports Profit-Sharing and Reinsurance Glossary
Plain-language definitions for CFC, NCFC, DOWC, Retro, premium, reserves, earned premium, loss ratio, claims, cancellations, and dealer participation.
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Powersports Finance Training connects profit participation to product production, claims feedback, cancellations, and dealership operating discipline. For deeper structure comparison, tax, reserve, reporting, fee, governance, and program-evaluation education, continue to Dealer-Reinsurance.com or AutomotiveReinsurance.com.
Powersports Profit-Sharing and Reinsurance Glossary: what dealers need to know
Profit-sharing programs use specialized terms that can sound similar while carrying different legal, accounting, tax, and economic meanings. This glossary provides educational starting points. The controlling definitions are always the applicable agreements, financial statements, program documents, laws, and qualified advisor interpretations.
Structures
Retro: a retrospective profit-sharing agreement that can provide participation without a dealer-owned entity. CFC: a controlled foreign corporation owned by a dealer or group and used in a reinsurance structure. Super CFC: a term used for certain dealer-owned arrangements intended for greater scale; exact design and treatment require professional review.
NCFC: a non-controlled foreign corporation using shared ownership in which an individual dealer does not control the entity. DOWC: a domestic dealer-owned warranty company that may provide significant product and program control along with substantial operating responsibility.
Contract economics
Retail price: the amount charged to the customer. Premium: revenue associated with the contract risk according to the program. Earned premium: the portion recognized as coverage is provided. Unearned premium: the portion associated with future coverage obligations.
Ceding fee or acquisition cost: compensation or cost deducted in transferring business, depending on the program. Administration fee: an amount paid for contract administration. Underwriting result: earned premium less claims and relevant underwriting expenses under the program definitions.
Claims, reserves, and performance
Claim frequency is the number of claims relative to an exposure measure. Claim severity is the average or distribution of claim cost. Loss ratio compares defined losses with defined premium; the exact numerator and denominator matter.
Reserve is an amount established for expected obligations. Case reserve relates to a reported claim. IBNR means incurred but not reported and estimates obligations that have occurred but are not yet reported. Reserve release is a reduction in required reserves as obligations develop; it is not automatically a distribution.
Ownership, access, and reporting
Capitalization is funding contributed to support the entity and its obligations. Surplus is the excess of assets over liabilities under applicable accounting and program rules. Distribution is a transfer to owners that must comply with contracts, financial condition, governance, and applicable requirements.
Runoff is the period in which existing contracts continue to develop after new production stops. Cohort or vintage reporting groups contracts by sale period. Pro forma is a projection based on stated assumptions, not a guaranteed result.
Questions to clarify before acting.
Is premium the same as cash available to the dealer?
No. Premium supports obligations and is affected by fees, reserves, claims, cancellations, expenses, taxes, and program rules.
Is loss ratio calculated the same way everywhere?
Not always. Ask which premium and losses are included, the accounting period, development method, and whether expenses are part of the calculation.
Which definition controls if this glossary differs from a contract?
The applicable agreements, program documents, financial statements, law, and qualified advisor interpretation control. This glossary is educational only.
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