Senate Bill 6241 - Independently Procured Insurance (Washington, 2020)

Summary

Senate Bill 6241 of the State of Washington, 66th Legislature, 2020 Regular Session, is an act relating to independently procured insurance and applying the state insurance premium tax to such insurance for both in-state and out-of-state risk. Senators Liias, Keiser, Wilson, C., Das, and Van De Wege are listed as sponsors, and the heading says it was introduced by request of Insurance Commissioner. The bill limits the ability to independently procure insurance to persons who qualify as an exempt commercial purchaser and requires them to file a form with the commissioner. An exempt commercial purchaser who procures insurance with an unauthorized insurer must file a report within sixty days. The bill takes effect January 1, 2021.

Summary drafted by a model from the document's text below and checked by script against that text before publication. It is a navigation aid, not a reading of what the document proves. Where AI is used

Full text

     Z-0767.1

                               SENATE BILL 6241


     State of Washington       66th Legislature       2020 Regular Session

     By Senators Liias, Keiser, Wilson, C., Das, and Van De Wege; by
     request of Insurance Commissioner

     Read first time 01/14/20.       Referred to   Committee   on   Financial
     Institutions, Economic Development & Trade.




 1       AN ACT Relating to independently procured insurance and applying
 2   the state insurance premium tax to such insurance for both in-state
 3   and out-of-state risk; amending RCW 48.15.010 and 48.14.095; adding
 4   new sections to chapter 48.15 RCW; creating a new section;
 5   prescribing penalties; and providing an effective date.


 6   BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:


 7       NEW SECTION.   Sec. 1.   (1) The ability to independently procure
 8   insurance in this state is limited to persons who qualify as an
 9   exempt commercial purchaser, as defined in RCW 48.15.010.
10       (2) Prior to independently procuring insurance in this state, a
11   person must establish that they qualify as an exempt commercial
12   purchaser. To establish that a person qualifies as an exempt
13   commercial purchaser, the person must file a form, in the format
14   prescribed by the commissioner, attesting that the person qualifies
15   as   an  exempt   commercial   purchaser  and   providing  additional
16   information as required by the commissioner. The commissioner may
17   request records to confirm that the person qualifies as an exempt
18   commercial purchaser.
19       (3) Every exempt commercial purchaser whose home state is
20   Washington state and who procures, causes to be procured, continues,
21   or renews insurance with an unauthorized insurer, including a person
                                     p. 1                             SB 6241
 1   or self-insurer who procures or continues excess loss, catastrophe,
 2   or other insurance, upon a subject of insurance that is resident,
 3   located, or to be performed in this state, other than insurance
 4   lawfully procured through a surplus lines broker under this chapter,
 5   must within sixty days after the date the insurance was bound or the
 6   effective date of the insurance, whichever is later, file a report
 7   with the commissioner in a form prescribed by the commissioner. The
 8   report must show the name and address of the exempt commercial
 9   purchaser, name and address of the unauthorized insurer, a general
10   description of the coverage, the binding or effective date, the
11   policy number, the amount of premium currently charged, and
12   additional pertinent information required by the commissioner. The
13   exempt commercial purchaser must attach the policy declaration pages
14   to the report.
15       (4) Insurance issued by an unauthorized insurer on risks or
16   property resident, situated, or to be performed in this state, or on
17   a person who is a resident of this state, is considered to be
18   insurance procured, continued, renewed, or performed in this state,
19   regardless of the location from which the application is made, the
20   negotiations are conducted, or the premiums are remitted.
21       (5) Persons who qualify as exempt commercial purchasers may only
22   independently procure unauthorized insurance that is properly
23   classified as property insurance under RCW 48.11.040 or general
24   casualty insurance under RCW 48.11.070.


25       NEW SECTION.   Sec. 2.   (1) An exempt commercial purchaser must,
26   on or before the first day of March of each year, file with the
27   commissioner a verified statement of all independently procured
28   insurance transacted during the preceding calendar year.
29       (2) The statement must be in a form and format as prescribed by
30   the commissioner and must show:
31       (a) Aggregate of net premiums; and
32       (b) Additional information as required by the commissioner.
33       (3) This section does not apply to unauthorized property and
34   casualty insurance independently procured by an insured when the
35   insured's home state is a state other than this state.


36       NEW SECTION. Sec. 3. (1) On or before the first day of March of
37   each year, an exempt commercial purchaser must remit to the state
38   treasurer through the commissioner a tax on the premiums, exclusive
                                     p. 2                          SB 6241
 1   of sums collected to cover federal and state taxes and examination
 2   fees, on independently procured insurance subject to tax transacted
 3   by the exempt commercial purchaser during the preceding calendar
 4   year, as shown by the annual statement filed with the commissioner,
 5   and at the same rates as are applicable to the premiums of authorized
 6   foreign insurers under this code. The tax when collected must be
 7   credited to the general fund.
 8       (2) For property and casualty insurance other than industrial
 9   insurance under Title 51 RCW, when this state is the exempt
10   commercial purchaser's home state, the exempt commercial purchaser
11   must pay premium taxes in accordance with the following:
12       (a) If the independently procured insurance covers risk or
13   exposures located inside of the United States, its territories, or
14   both, the tax so payable must be computed upon the entire premium
15   under subsection (1) of this section, without regard to whether the
16   policy covers risk or exposures that are located in this state; and
17       (b) If the independently procured insurance covers risk or
18   exposures located outside of the United States and its territories,
19   no tax under subsection (1) of this section is due or payable for the
20   premium properly allocable to the risks and exposures located outside
21   the United States and its territories.


22       NEW SECTION.   Sec. 4.    (1) An exempt commercial purchaser who
23   fails to file a report as required by the commissioner in section
24   1(3) of this act is subject to a one thousand dollar fine, per
25   violation.
26       (2) If an exempt commercial purchaser fails to file the annual
27   statement and fails to remit the tax provided by section 3 of this
28   act, by the last day of the month in which the tax becomes due, the
29   exempt commercial purchaser must pay the penalties and interest
30   provided in RCW 48.14.060. The tax may be collected by distraint, or
31   the tax and fine may be recovered by an action instituted by the
32   commissioner in any court of competent jurisdiction. Any fine
33   collected by the commissioner must be paid to the state treasurer and
34   credited to the general fund.


35       NEW SECTION.    Sec. 5.    The   commissioner   may   adopt   rules   as
36   necessary to implement this act.



                                     p. 3                               SB 6241
 1       Sec. 6. RCW 48.15.010 and 2011 c 31 s 1 are each amended to read
 2   as follows:
 3       The definitions in this section apply throughout this chapter
 4   unless the context clearly requires otherwise.
 5       (1) "Affiliate" means, with respect to an insured, any entity
 6   that controls, is controlled by, or is under common control with the
 7   insured.
 8       (2) "Affiliated group" means any group of entities that are all
 9   affiliated.
10       (3) With respect to an insured, an entity has "control" over
11   another entity when:
12       (a) The entity directly or indirectly or acting through one or
13   more other persons owns, controls, or has the power to vote twenty-
14   five percent or more of any class of voting securities of the other
15   entity; or
16       (b) The entity controls in any manner the election of a majority
17   of the directors or trustees of the other entity.
18       (4)(a) "Exempt commercial purchaser" means any person purchasing
19   commercial insurance that, at the time of placement, meets the
20   following requirements:
21       (i) The person employs or retains a qualified risk manager to
22   negotiate insurance coverage;
23       (ii) The person has paid aggregate nationwide commercial property
24   and casualty insurance premiums in excess of one hundred thousand
25   dollars in the immediately preceding twelve months; and
26       (iii) The person meets at least one of the following criteria:
27       (A) The person possesses a net worth in excess of twenty million
28   dollars, as the amount is adjusted under (b) of this subsection;
29       (B) The person generates annual revenues in excess of fifty
30   million dollars, as the amount is adjusted under (b) of this
31   subsection;
32       (C) The person employs more than five hundred full-time or full-
33   time equivalent employees per insured or is a member of an affiliated
34   group employing more than one thousand employees in the aggregate;
35       (D) The person is a not-for-profit organization or public entity
36   generating annual budgeted expenditures of at least thirty million
37   dollars, as the amount is adjusted under (b) of this subsection; or
38       (E) The person is a municipality with a population in excess of
39   fifty thousand persons.


                                     p. 4                          SB 6241
 1       (b) The amounts in (a)(iii)(A), (B), and (D) of this subsection
 2   must be adjusted to reflect the percentage change for the five-year
 3   period in the consumer price index for all urban consumers published
 4   by the bureau of labor statistics of the United States department of
 5   labor.
 6       (c) For the purpose of this subsection, "commercial insurance"
 7   means property and casualty insurance pertaining to a business,
 8   profession, occupation, nonprofit organization, or public entity.
 9       (5) "Independently procured insurance" means insurance procured
10   directly by a qualified exempt commercial purchaser from an
11   unauthorized insurer.
12       (6)(a) Except as provided in (b) of this subsection, "insured's
13   home state" means, with respect to an insured:
14       (i) The state in which an insured maintains its principal place
15   of business or, in the case of an individual, the individual's
16   principal residence; or
17       (ii) If one hundred percent of the insured risk is located out of
18   the state referred to in this subsection, the state to which the
19   greatest percentage of the insured's taxable premium for that
20   insurance contract is allocated.
21       (b) If more than one insured from an affiliated group are named
22   insureds on a single insurance contract issued by an unauthorized
23   insurer, the term "insured's home state" means the insured's home
24   state, as determined pursuant to (a) of this subsection, of the
25   member of the affiliated group that has the largest percentage of
26   premium attributed to it under the insurance contract.
27       (c) To determine the home state of the insured, the principal
28   place of business is the state where the insured maintains its
29   headquarters and where the insured's high-level officers direct,
30   control, and coordinate the business activities of the insured.
31       (((6))) (7) "Qualified risk manager" means, with respect to a
32   policyholder of commercial insurance, a person who meets all of the
33   following requirements:
34       (a) The person is an employee of, or third-party consultant
35   retained by, the commercial policyholder;
36       (b) The person provides skilled services in loss prevention, loss
37   reduction, or risk and insurance coverage analysis, and purchase of
38   insurance; and
39       (c) The person:


                                     p. 5                          SB 6241
 1       (i)(A) Has a bachelor's degree or higher from an accredited
 2   college or university in risk management, business administration,
 3   finance, economics, or any other field determined by the commissioner
 4   to demonstrate minimum competence in risk management; and
 5       (B)(I) Has three years of experience in risk financing, claims
 6   administration, loss prevention, risk and insurance analysis, or
 7   purchasing commercial lines of insurance; or
 8       (II) Has one of the following designations:
 9       (AA) A designation as a chartered property and casualty
10   underwriter (CPCU) issued by the American institute for CPCU/
11   insurance institute of America;
12       (BB) A designation as an associate in risk management issued by
13   the American institute for CPCU/insurance institute of America;
14       (CC) A designation as (([a])) a certified risk manager issued by
15   the national alliance for insurance education and research;
16       (DD) A designation as a RIMS fellow issued by the global risk
17   management institute; or
18       (EE) Any other designation, certification, or license determined
19   by the commissioner to demonstrate minimum competency in risk
20   management;
21       (ii)(A) Has at least seven years of experience in risk financing,
22   claims administration, loss prevention, risk and insurance coverage
23   analysis, or purchasing commercial lines of insurance; and
24       (B)   Has   any    one   of   the   designations    specified  in
25   (c)(i)(B)(II)(AA) through (EE) of this subsection;
26       (iii) Has at least ten years of experience in risk financing,
27   claims administration, loss prevention, risk and insurance coverage
28   analysis, or purchasing commercial lines of insurance; or
29       (iv) Has a graduate degree from an accredited college or
30   university in risk management, business administration, finance,
31   economics, or any other field determined by the commissioner to
32   demonstrate minimum competence in risk management.


33       Sec. 7.   RCW 48.14.095 and 2008 c 217 s 8 are each amended to
34   read as follows:
35       (1) This section applies to any insurer or taxpayer, as defined
36   in RCW 48.14.0201, violating or failing to comply with RCW
37   48.05.030(1),    48.17.060,    48.36A.290(1),   48.44.015(1),    or
38   48.46.027(1).


                                     p. 6                          SB 6241
 1       (2) Except as provided in subsection (7) of this section, RCW
 2   48.14.020, 48.14.0201, and 48.14.060 apply to insurers or taxpayers
 3   identified in subsection (1) of this section.
 4       (3) If an insurance contract, health care services contract, or
 5   health maintenance agreement covers risks or exposures, or enrolled
 6   participants only partially in this state, the tax payable is
 7   computed on the portion of the premium that is properly allocated to
 8   a risk or exposure located in this state, or enrolled participants
 9   residing in this state.
10       (4) In determining the amount of taxable premiums under
11   subsection (3) of this section, all premiums, other than premiums
12   properly allocated or apportioned and reported as taxable premiums of
13   another state, that are written, procured, or received in this state,
14   or that are for a policy or contract negotiated in this state, are
15   considered to be written on risks or property resident, situated, or
16   to be performed in this state, or for health care services to be
17   provided to enrolled participants residing in this state.
18       (5) Insurance on risks or property resident, situated, or to be
19   performed in this state, or health coverage for the provision of
20   health care services for residents of this state, is considered to be
21   insurance procured, continued, renewed, or performed in this state,
22   regardless of the location from which the application is made, the
23   negotiations are conducted, or the premiums are remitted.
24       (6) Premiums on risks or exposures that are properly allocated to
25   federal waters or international waters or under the jurisdiction of a
26   foreign government are not taxable by this state.
27       (7) This section does not apply to premiums on insurance procured
28   by a licensed surplus line broker under chapter 48.15 RCW.
29       (8) This section does not apply to premiums on insurance
30   independently procured by an exempt commercial purchaser under
31   sections 1 through 4 of this act.


32       NEW SECTION. Sec. 8. Sections 1 through 4 of this act are each
33   added to chapter 48.15 RCW.


34      NEW SECTION.   Sec. 9.   This act takes effect January 1, 2021.

                                   --- END ---




                                      p. 7                          SB 6241


File and source

File

2020-01-30_a26428_bill_6241.pdf

Size

87,408 bytes

SHA-256

0238421bbf4a21ae9cb22a2c9e0faa986bc1879f2346c9eceb52668e5160540a

Our copy

2020-01-30_a26428_bill_6241.pdf

Original

No public link identified.