Can a Dealer Sell a Reinsurance Company Separately?
Before discussing price, determine exactly what is transferable, what liabilities remain, and what future economics actually accompany the transaction.
Potentially—but this question is far more complicated than selling an ordinary operating company.
The first question is:
Those are very different transactions.
Why Valuation Is Complicated
A reinsurance company may contain:
- Investment assets.
- Insurance reserves.
- Unearned premium.
- Outstanding claim liabilities.
- Surplus.
- Future expected underwriting results.
- Contractual rights.
- Tax attributes.
- Restrictions.
A buyer cannot simply look at the bank account and call that the value.
Future Production Is Different From Existing Business
If the dealer sells the dealership but retains the reinsurance company, the old reinsurance company may no longer receive new production. That changes its economics dramatically.
Conversely, a buyer acquiring rights to future profitable production may assign additional value to that opportunity.
Transfer Restrictions Matter
Insurance arrangements may involve:
These must be reviewed before assuming the entity is freely transferable.
The Bottom Line
A reinsurance company may have separable economic value, but selling it is not as simple as selling dealership real estate or equipment.
When was the last time someone independently reviewed your reinsurance program?
Confidential. No obligation. There is no charge for the initial assessment. You may discover an opportunity, a problem, or that your program is exactly where it should be. But you’ll know.