In the powersports industry, warranties and service contracts are more than just consumer protection tools — they’re a major revenue opportunity for dealerships. Traditionally, dealerships have relied on profit-sharing arrangements with warranty administrators, receiving a percentage of the profits generated from the products they sell. While this model has served the industry for many years, it comes with limitations. As more dealerships search for ways to retain higher profits, build business equity, and strengthen customer relationships, powersports reinsurance program have emerged as a compelling alternative.
The primary difference between traditional profit sharing and a reinsurance structure comes down to who truly owns the profit generated from service contracts. In a standard model, the administrator keeps most of the underwriting profit, and the dealership receives a negotiated share. The dealer earns commissions upfront, but long-term returns are dependent on the administrator’s payout structure. In many cases, the dealer has little visibility or control over claims, reserves, and investment earnings — even though the dealership is the one selling the contracts.
Reinsurance flips that dynamic. With a reinsurance program, the dealership forms and owns a reinsurance company (often called a producer-owned reinsurance company or PORC). Instead of the administrator retaining the profits from service contracts, the underwriting profit and investment income flow back to the dealer’s reinsurance company. This turns warranty sales into a wealth-building asset rather than a quick commission. Over time, this results in substantial earnings growth that accumulates in a protected account — not just a percentage paid out by a third party.
Control is another major differentiator. In reinsurance, dealers gain much more insight into the performance of their warranty program. They can track reserves, claims experience, and overall profitability with transparency. This level of visibility allows for smarter decision-making, improved product offerings, and better customer support. With traditional models, dealers often rely solely on administrator reports, which may not provide clear detail or flexibility.
Customer loyalty is also strengthened through reinsurance. Since profits are tied to keeping contracts profitable, dealers have a vested interest in high-quality repair work, strong relationship management, and a positive ownership experience. Customers are more likely to return for service, renew contracts, and refer friends when they trust the dealership’s support. Traditional profit sharing doesn’t create the same alignment of incentives — the administrator benefits regardless of whether the customer returns to the dealership for repairs.
There are some considerations with reinsurance, such as setup requirements and compliance structures. Establishing a reinsurance company involves legal, accounting, and regulatory responsibilities. However, most reputable reinsurance partners provide turnkey solutions to simplify the process, allowing dealers to focus on growth rather than administration.