Costco’s captive insurance company, NW Re limited, has become the second captive to settle with the Washington State insurance commissioner, Mike Kreidler.
NW Re settled with Kreidler on 8 March, paying $2.4 million in unpaid premium taxes and $1.2 million in fines, tax penalties, and interest, after self-reporting its ‘unauthorised activity’ in December 2018.
It provided deductible reimbursement for Costco’s liability and workers’ compensation from 2000 until 2019 without authorisation.
NW Re’s self-reported after Kriedler’s announcement in December 2018 that he was launching a project to identify all captives that “unlawfully insured any risk in the state” and would provide reduced fines and penalties to captives that self-reported.
Kreidler’s office has now collected around $4.4 million in settlements with captives. This follows a previous settlement between Kreidler and Microsoft’s captive, Cypress, in August 2018.
Fines and penalties increase every six months for captive insurers that fail to self-report, starting 1 July 2019, After 30 June 2020, captives will face the maximum fines and tax penalties.
Washington state law requires that any risk insured in the state be done through an admitted insurer or through an unauthorised insurer placed through a licensed surplus line broker.
State law also requires insurance companies to pay a 2 percent tax based on their written premiums.
At the Captive Insurance Companies Association 2019 conference, panelists suggested there was no clear answer to whether other states would emulate Washington’s stance on captives.