Search

Washington State Implements Registration and Tax Requirement on Eligible Captive Insurers Operating in the State - JD Supra

jawawuts.blogspot.com

On May 12, 2021, Washington’s legislature passed into law Senate Bill 5315, which implements a registration requirement and a tax on captive insurers operating in Washington. Although Washington does not license captive insurers, this new legislation now recognizes the concept of “eligible” captive insurers operating in the state but located in other jurisdictions. Such captive insurers must register with and pay premium tax to Washington’s Office of the Insurance Commissioner. An “eligible” captive insurer is defined by the new law as:

  • a wholly owned subsidiary of a corporation or partnership that insures the risks of its owner, and/or the owner’s affiliates;
  • one or more of the insured entities maintains a principal place of business in Washington;
  • the captive’s assets exceed its liabilities by at least $1 million; and
  • the captive maintains a captive license in its domiciliary jurisdiction.

The new law requires that captive insurers meeting the above definition register with the Office of the Insurance Commissioner within 120 days from the date the legislation passed (May 12, 2021), or within 120 days of first issuing a policy on Washington risks. The registration fee is $2,500, with the annual renewal fee to be set by the Washington Commissioner, but in no event shall such renewal fee exceed $2,500. Where an eligible captive insurer fails to register, it is deemed an unauthorized insurer and is subject to fines and penalties applicable to unauthorized insurers generally.

On or before March 1 annually, the registered eligible captive must remit a tax in the amount of two percent of the premiums collected for insurance directly procured by and provided to the captive’s parent or affiliate(s) for “Washington risks.” The legislation defines “Washington risks” as “the share of risk covered by the premiums that is allocable to this state, based on where the underlying risks are located or where the losses or injuries giving rise to covered claims arise.” The registered eligible captive may use “any reasonable method of determining such an allocation [of premiums to Washington], including actuarial analysis or use of a proxy such as sales, property value, or payroll.”

The new law has retroactive effect and states that taxes on premiums are due “for any period after January 1, 2011, if not previously remitted to the commissioner,” although taxes due on periods before July 1, 2021 are not subject to penalties or interest.

It should be noted that registered eligible captive insurers are generally exempted from the standards applicable to placement of unauthorized insurance products (particularly under the surplus lines laws). However, Washington is traditionally a state that does not recognize the concept of the “direct procurement” or “independent procurement” of insurance by an insured from an unauthorized insurer; as such, while Washington’s new captive laws implicitly allow for a particular direct procurement transaction (i.e., between an eligible captive insurer and its Washington affiliate), this new legislation does not necessarily allow for the consummation of a direct placement of an insurance policy by an unauthorized insurer with an unaffiliated Washington insured.

A copy of the bill as passed can be found here.

Adblock test (Why?)



"captivity" - Google News
June 03, 2021 at 10:18PM
https://ift.tt/2TwCSP0

Washington State Implements Registration and Tax Requirement on Eligible Captive Insurers Operating in the State - JD Supra
"captivity" - Google News
https://ift.tt/3b01anN
https://ift.tt/3dbExxU

Bagikan Berita Ini

0 Response to "Washington State Implements Registration and Tax Requirement on Eligible Captive Insurers Operating in the State - JD Supra"

Post a Comment

Powered by Blogger.