A bill that would see the creation of a framework in Washington for registering eligible captive insurers and imposing a premium tax on the risk covered by premiums allocable to the state has become law after governor Jay Inslee signed the legislation on 12 May.
The proposed bill would bring $29 million in back taxes and generate revenues of more than $2.5 million per year going forward.
It will also see eligible captive insurers must pay a 2 per cent premium tax for insurance directly procured by and provided to its parent or affiliate for Washington risks during the preceding calendar year.
The bill was submitted during the Washington State 2021 legislative session and passed both
the Senate and the House.
The bill was requested by insurance commissioner Mike Kreidler and sponsored by Senator Mark Mullet.
In August 2020, Commissioner Kreidler started a study to determine how many organisations in the state are not paying insurance premium tax as required under state law.
In 2019, commissioner Kreidler added captive insurance to both his 2020 and 2021 legislative priority list.
Kreidler spoke to Captive Insurance Times in February last year about his views and plans for captive insurance operating with Washington State.
The OIC states that this new framework provides regulatory authority, consumer protections and the opportunity to improve the business climate for Washington employers while simultaneously generating additional revenue for the state budget.
Commenting on the new law, Kreidler says: “This is an important step to allow companies to continue utilising this prudent risk management tool, while paying their fair share of premium tax to the state’s general fund, like other insurance companies have done for decades.”
He adds: “Moreover, this law has a profound impact on the use of captives nationally to make sure they have the financial resources they need and have accountability for the actions they take for those they are promising to protect.”
