6 January 2020Analysis

Two captives banned from selling insurance in Washington

Mike Kreidler, the Insurance Commissioner for Washington State, has ordered two captives, Olympic Casualty Insurance and ASA Assurance, to stop writing insurance in the state for their parent companies, Starbucks and Alaska Air Group.

However, the order against Olympic Casualty Insurance has been stayed pending an administrative hearing. A prehearing conference has been scheduled for January 14.

Washington requires companies to buy insurance from an admitted insurer or through a licensed surplus line broker, and the two captives are not authorised under Washington state law.

In September Kreidler ordered ASA Assurance, the captive for Alaska Air Group, to pay more than $2.5 million in unpaid premium tax and penalties owed to Washington state. ASA issued four policies for Alaska Air Group and its subsidiaries, Alaska Airlines, Horizon Air Industries and McGee Air Services, collecting $91 million in premiums. ASA demanded a hearing, which has been set for July 13 this year.

Kriedler ordered Starbucks’ captive, Olympic Casualty Insurance, to pay $22.8 million in unpaid premium taxes, interest, and penalties, and a $1.1 million fine, in December. Olympic issued 44 policies in Washington state from 2008 until 2019, collecting $633.4 million in premiums.

Kreidler set up a self-reporting plan for captives in December 2018 that offered tiered fines to encourage early repayment of past due taxes.

To date, 16 captives have self-reported and two captives have paid $2.9 million in unpaid premium taxes and $1.4 million in fines, tax penalties and interest: Cypress, Microsoft’s captive, settled in August 2018 for $876,820, while NW Re, captive for Costco Wholesale, settled for $3.6 million in March 2019.