Washington state orders Alaska Air captive to pay $2.5m
ASA Assurance, the captive of Alaska Air Group, has demanded a prehearing conference as it appeals a $100,000 fine imposed by the Washington State Office of the Insurance Commissioner (OIC).
The insurance commissioner has also demanded premium tax, interest and penalties from ASA. The hearing is set for September 30.
The insurance commissioner handed out the fine for transacting insurance in Washington State without holding a certificate of authority. ASA was also accused of issuing unauthorised insurance to Washington insureds without having it placed through a licensed surplus line broker. It also allegedly failed to remit a two percent premium tax to the state of Washington for insurance on risks or exposures located in Washington State in a timely manner.
ASA contests whether the OIC has the authority to regulate self-insurance, and whether ASA itself is "engaged in the business of making contracts of insurance," and thus covered by the Washington Insurance Code's definition of insurer.
It is also disputing whether ASA is within the scope of the OIC's authority under the McCarran- Ferguson Act, and whether the OIC has authority to impose premium tax that relates to risks insured outside Washington.
In December Washington’s insurance commissioner, Mike Kreidler, offered captive insurance companies an opportunity to pay a substantially reduced fine and premium tax penalty if they admitted to unlawfully insuring any risk in the state over the past 15 years.
The self-reporting period commenced on January 1 this year, running to June 30, 2020. From July 1, 2019, the fine amount and tax penalty will increase for every six months that the captive insurer waits to self-report.
Kreidler said he would pursue maximum fines and tax penalties against captive insurers that have unlawfully insured risk in Washington state after the 18-month grace period ends on June 30, 2020.
Unlawfully insured risk from more than 15 years ago should also be self-reported, the commissioner said, and would not face fines or premium taxes. Failure to self report by June 30, 2020 would also result in Kreidler pursuing the maximum fines and tax penalties.
Air Alaska, ASA Assurance, Washington State Office of the Insurance Commissioner