Washington state orders Alaska Air captive to pay $2.5m
Washington state Insurance Commissioner Mike Kreidler has ordered ASA Assurance, Alaska Air Group’s captive, to pay more than $2.5 million in unpaid premium tax and penalties.
The money is owed to Washington state for the unauthorised sale of insurance, according to the Washington Office of the Insurance Commissioner (OIC).
Hawaii-based ASA Assurance issued four policies for Alaska Air Group and its subsidiaries, Alaska Airlines, Horizon Air Industries and McGee Air Services, collecting $91 million in premiums.
However, the captive was not admitted to sell insurance in Washington state, the OIC said. State law requires insurance companies to pay a 2 percent tax based on their written premiums, but ASA paid no premium tax on the insurance it unlawfully sold, the OIC added.
Washington state does not currently license captive insurers. Companies must buy insurance from either an admitted insurer or through a licensed surplus line broker.
Kreidler determined in December 2018 that many large Washington companies are using captives to purchase their own insurance and failing to pay premium tax. His office is working to identify all captives doing business in Washington state.
To date, nine 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.
Kreidler reached a settlement of $876,820 with Cypress, Microsoft’s captive, in August 2018, and with NW Re, Costco Wholesale’s captive, in March. NW Re paid $3.6 million in premium taxes, tax penalties, interest and fines.
ASA Assurance is still awaiting a hearing before an administrative law judge, with a prehearing telephone conference having been scheduled for September 30.