Washington State publishes captives proposals
Washington has published its proposals for implementing the new legislation for captive insurers. Under the bill passed in May, captives active in the state are required to register and pay insurance premium tax. The “Stakeholder Draft” from the Office of the Insurance Commissioner indicates how it intends to implement the new law.
The draft confirms that eligible captive insurers must register with the commissioner within 120 days of either 12 May 2021 or after first issuing a policy covering Washington risks. The fee will be $2,500. Registration must be renewed annually by 30 June. If a captive insurer’s registration expires, it will have to file a new application and pay the fee again.
By 1 March each year, all registered captive insurers must also pay insurance premium tax: two percent on premiums for insurance directly procured by and provided to its parent or another affiliate for Washington risks during the previous calendar year. They must pay the same for all premiums written since 1 January 2011, if these have not previously been paid to the commissioner.
An independent study commissioned by the commissioner’s office previously estimated that captives will owe more than $29 million in past premium taxes.
Captive insurers failing to register or renew will be held to be acting unlawfully under the Revised Code of Washington (RCW) and be subject to “fines and penalties under RCW 48.15.023, taxation under RCW 48.14.095 and penalties and interest under RCW 48.14.060”. Fines under RCW 48.15.023 can be up to $25,000 for each violation.
A captive insurer not eligible to register cannot cover Washington risk unless acting as a reinsurer. Doing so after 30 June 2021 will also be unlawful.