Example Solution

Original Equipment Manufacturer (OEM)
Product Warranty Insurance


Example Solution

The most common structure for an OEM Warranty Insurance program is a one-time single payment per unit for a multi-year program. For a single payment the OEM can offer a long term limited warranty and then moves the liability off their balance sheet for the extended term. The OEM does retain an initial retention period, and then all future warranty obligations may be transferred to the third party.

The image below shows a simple example where an OEM offers customers a 5 Year Limited Warranty. In this example, the OEM retains the 1st year and then transfers the additional 4 years to an insurance carrier.


The OEM and carrier develop what is needed for the expected claims in the future and then add a fee for the carrier's income and expenses. The variables are the expected frequency of failures, the severity for a failure, an underwriting target loss ratio and a fee for the carrier's income and expenses. Fees range from single digits the low teens, depending on size, scope and scale of the program. Depending on the size and type of program, the OEM may participate in any remaining underwriting profit.

Also, there is no need to go through a third party for administration or other services unless the OEM needs the support. The OEM sends a sales file and a claims file to the carrier each month and then remits the net amounts due.


Meramec Secure is a nationwide designer and producer of specialty insurance and service contract solutions and services to assist companies in sourcing or building new specialty insurance, service contract, and warranty products and programs.

Meramec Secure supports contractual liability insurance policies, service contract reimbursement insurance policies, product warranty insurance, auto deductible reimbursement insurance, home deductible reimbursement insurance, shipping insurance, home warranty, and limited and extended warranty solutions for appliance, automotive, electronics, marine, IoT, and other product categories.
Contact Meramec Secure. Inc. for more information.