Washington Governor Signs Law Applying Fees and Taxes to Captives
May 14, 2021
Legislation signed into law on May 12, 2021, by Washington State Governor Jay Inslee sets new requirements for captive insurance companies licensed in other domiciles but doing business in Washington State.
Under the legislation, S.B. 5315, captive insurance companies licensed elsewhere and operating in Washington will be required to pay an initial registration fee of $2,500, with the Washington Office of the Insurance Commissioner given the authority to set the annual fee. The annual fee could not exceed $2,500.
In addition, captive insurance companies will be assessed an annual 2 percent premium tax on insurance provided to their parents or affiliates for Washington risks. The tax will have to be paid each year no later than March 1.
However, captives affiliated with public institutions of higher education will be exempt from the premium tax.
The new law will also require captive insurance companies licensed elsewhere but doing business in Washington to pay the 2 percent premium tax on the coverage they provided in the state going back to January 1, 2011.
An independent study requested by the Washington insurance commissioner estimated that the new premium tax will generate $2.5 million per year, with an additional $29 million in revenues coming from the retroactive premium tax payment requirement.
The new law, though, does not authorize the licensing of captive insurance companies in the state.
State insurance regulators strongly back the new law.
"This is an important step to allow companies to continue utilizing 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," Insurance Commissioner Mike Kreidler said in a statement.
May 14, 2021