Washington Insurance Commissioner Mike Kreidler has started a study to determine how many organisations in the state are not paying insurance premium tax as required under state law.
The study launched with an initial survey sent to around 5,000 businesses and other organisations in Washington asking if they use a captive insurance company.
Currently, captive insurers are not authorised under Washington state law. Additionally, companies using them are not paying a 2 percent premium tax on the insurance they buy.
Kreidler’s office contracted with Washington-based Milliman to conduct the survey and study.
It was noted that the information gathered will not identify organisations failing to pay the premium tax but will show an overall projected amount owed.
I’m addition, Washington’s Department of Revenue is assisting with the survey.
Kreidler’s office will report results of the study to the legislature later this year.
At the start of this year, Kreidler introduced draft legislation on captive insurance.
The legislation would create a statutory framework for how captive insurance companies can be formed by Washington state companies, who can form them and what taxes will be paid by them to Washington state.
Commenting on that legislation in an interview with Captive Insurance Times,Kreidler noted that this legislation would not ban captives.
He continued: “Instead, it would create a legal framework to allow their use. However, the bill would not make Washington a captive domicile state. Washington is not a captive domicile state, so captive insurers cannot be set up in this state.”
In addition, Kreidler set up a self-reporting plan for companies in December 2018 that resulted in some businesses reporting their use of this arrangement. This led to the initial payment of about $4 million in previously unpaid premium tax, fines and interest.
He explained that in an effort to understand the magnitude of the amount of unpaid tax, he has suspended enforcement actions against captive insurers, pending results of the survey and study.