Issue No. 6 | May 12, 2026

Intelligence for F&I agents, administrators, and dealership finance professionals.

THE STATISTIC: B+

B+ is the minimum AM Best financial strength rating that states generally require of Contractual Liability Insurance Policy insurers, the carrier that backs many VSC, GAP, and ancillary protection products sold at the dealership. That threshold is the regulatory floor for the insurance backing your F&I products. For dealers participating in affiliated reinsurance programs, the CLIP structure determines how directly that insurer backstop is tied to administrator-level risk.

Under First Dollar CLIP, the rated carrier assumes active reserve and claims responsibility from inception. Under Failure-to-Perform CLIP, the administrator is the active claims payer until insolvency. Under FTP structures, the insurer’s obligation generally becomes material only after administrator failure. Affiliated dealer reinsurance programs generally operate under FTP structures where regulatory conditions allow, because FTP structures may offer lower minimum trust balances and greater investment flexibility, which materially affects the long-term economics of a dealer-owned reinsurance company. Understanding the relationship between your administrator’s CLIP structure and the regulatory protection behind it is foundational to understanding what your reinsurance program is actually backed by.

THE F&I ANGLE

The distinction matters most for dealerships that own affiliated reinsurance companies. Dealership-affiliated reinsurance programs generally prefer Failure-to-Perform CLIP structures where regulatory conditions allow them. FTP arrangements may allow lower minimum trust balances and greater investment flexibility than many First Dollar programs require. Investment flexibility inside the trust structure is one of the primary economic advantages of a dealer-owned reinsurance company. FTP structures may permit larger equity allocations inside trust structures compared to the more restrictive reserve requirements associated with First Dollar CLIP. Over the life of a reinsurance program, that investment flexibility compounds into a material economic difference.

The F&I desk is where the economics start. The rate, term, and contract structure of the VSC or GAP product sold at the desk determines the premium flowing into the trust. The CLIP structure the administrator operates under materially affects how much investment latitude your reinsurance company has with those funds, how reserves are structured, and how directly you participate in underwriting profit. An F&I agent selling into a First Dollar CLIP program is participating in a different economic structure than one selling into an affiliated reinsurance company running on FTP CLIP.

Understanding your administrator’s CLIP structure, and how it interacts with your affiliated reinsurance program, is foundational to evaluating the long-term economics of your F&I platform.

FROM THE BLOG

First Dollar CLIP vs. Failure-to-Perform CLIP: A Complete Guide to Risk Transfer in Automotive Warranty Programs

This week’s post explains First Dollar and Failure-to-Perform CLIP structures, how premium and claims move through each arrangement, and why each structure creates a different reserve and investment profile. It also covers why FTP structures are commonly preferred in affiliated dealer reinsurance programs and the mechanics behind that preference.

THE DESK STAT

B+: the AM Best minimum that states generally require of CLIP insurers backing many VSC and ancillary products sold at the dealership. Under First Dollar CLIP, the rated insurer assumes active reserve and claims responsibility from inception. Under Failure-to-Perform CLIP, the insurer’s obligation generally becomes material only after administrator failure. The products your customers buy look identical either way. The insurance structure standing behind them does not. Do you know which structure your administrator is running?

Until next Tuesday —

If this raised questions about how your administrator structure affects your affiliated reinsurance program, reply with “reinsurance” here and we will schedule 20 minutes.