Captives may fight the Washington State Insurance Commissioner’s plan for companies that ‘unlawfully insure risks in the state’, according to Captive Insurance Companies Association (CICA) president Dan Towle.
The commissioner is offering such captives an 18 month grace period the chance to pay significantly reduced fines and premium tax penalties by self-reporting the activity.
Following the grace period, which begins 1 January 2019 and closes 30 June 2020, the commissioner will pursue maximum fines and tax penalties.
The plan follows the decision of Microsoft’s captive, Cypress Insurance, to settle for $876,820 with the commissioner in August after it was issued a cease and desist order in May.
While Cypress is itself domiciled in Arizona, its sole insureds, Microsoft and its subsidiaries, are based in Redmond, Washington, and the commissioner alleged that the captive was unlawfully insuring risks in the state.
Following the settlement, Kreidler suggested his office would turn their attention to other captives domiciled elsewhere that insure risks in the state and this scheme appears to be the start of that strategy.
Towle said that though Microsoft settled, the legal arguments put forward for why this tax should not apply for them “were strong”.
He commented: “Microsoft settled, and unfortunately, I think that may have emboldened the insurance commissioner. However, it does not mean other captives will chose to pay just because Microsoft did.”
“I would not be surprised if captives decided to fight the Washington State Insurance Commissioner’s plan.”
Towle concluded that “CICA is very concerned about this new development” and is “evaluating all of our options and how best to support our members and defend our industry”.
