The State of Washington Office of the Insurance Commissioner has issued a cease and desist order to Microsoft’s Arizona-based captive, Cypress Insurance.
Order No.18-0220, which was issued 9 May, prohibits Cypress from engaging in or transacting the unauthorised business of insurance in the state of Washington, or seeking and obtaining insurance business in the state.
It also requires the captive to cease and desist from soliciting state residents to purchase any insurance to be issued by any unauthorised insurer or induce them to purchase any insurance contract.
Cypress, which was admitted as a captive company in Arizona in 2008, is a pure captive whose sole insured is Microsoft and its liabilities which are based in Redmond, Washington.
The order states that Cypress doesn’t hold a certificate of authority to transact insurance in Washington State, doesn’t hold a Washington state surplus line broker’s license to place non-admitted insurance in the state, nor is insurance coverage provided by the captive placed through a surplus line broker licensed in the state.
Additionally, it claims Cypress has not paid premium tax on the $71,194,935 it collected between 2013 and 2018, representing $1,423,898.70 in unpaid premium tax.
According to the order Cypress’s actions, therefore, violate “Revised Code of Washington (RCW) 48.05.030(1) (certificate of authority required), RCW 48.15.020(1) (solicitation by unauthorized insurer prohibited), RCW 48.17.060(1) (license required), RCW 48.14.020(1) (failing to remit two percent premium tax),and RCW 4S.14.060(l)-(2) (failing to timely remit two percent premium tax)”.
The order does not prevent the captive from fulfilling the terms of contracts formed prior to the date of the order, 9 May 2018, from providing a refund when requested by Washington insured or upon request of the Insurance Commissioner, further ordering the replacement of Cypress contracts with an authorised insurer.
Cypress has the right to demand a hearing within 90 days of receipt of the order.
