Senate Bill 6331 - Captive Insurers (Washington, 2020)

Summary

Senate Bill 6331 of the State of Washington, 66th Legislature, 2020 Regular Session, is an act relating to captive insurers, amending RCW 48.14.020, 48.14.095, 48.15.160 and 82.04.320. Senators Mullet and Wilson, L. are listed as sponsors. The findings state that a framework for Washington corporations to manage risks through captive insurers will facilitate the growth and safety of those businesses. A Washington captive insurer must register with the commissioner and pay a tax of two thousand five hundred dollars to receive a certificate of captive authority, and a registered Washington captive insurer is not liable for premium tax. The bill declares an emergency.

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Full text

     S-5264.1

                                  SENATE BILL 6331


     State of Washington          66th Legislature      2020 Regular Session

     By Senators Mullet and Wilson, L.




1        AN ACT Relating to captive insurers; amending RCW 48.14.020,
2    48.14.095, 48.15.160, and 82.04.320; adding a new chapter to Title 48
3    RCW; creating a new section; and declaring an emergency.


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


 5       NEW SECTION.   Sec. 1.   The legislature finds that creating a
 6   framework for Washington corporations to manage their risks through
 7   captive insurers will facilitate the growth and safety of those
 8   businesses and protect the public interest. The legislature further
 9   finds that captive insurance promotes prudent risk management and
10   provides access to insurance and reinsurance markets that may not be
11   available to Washington businesses otherwise. The legislature
12   believes that encouraging the use of captive insurance will support
13   those who rely upon the strength and stability of employers in this
14   state.


15       NEW SECTION. Sec. 2. This chapter may be known and cited as the
16   Washington captive insurer act.


17       NEW SECTION.      Sec. 3.   The definitions in this section apply
18   throughout  this      chapter unless  the   context  clearly  requires
19   otherwise.
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 1       (1)   "Affiliate"  means   an   entity   directly or  indirectly
 2   controlling, controlled by, or under common control with another
 3   entity. "Affiliate" also means any person that holds an insured
 4   interest because that person has or had an employment or sales
 5   contract with an insured person.
 6       (2) "Control" means possession of the power to direct the
 7   management and policies of an entity through ownership of voting
 8   securities, by contract, or otherwise.
 9       (3) "Washington captive insurer" means an insurance company with
10   the following characteristics:
11       (a) It is owned by a corporation that has its principal place of
12   business in Washington and is not itself an insurer;
13       (b) It insures risks of the parent corporation, the parent
14   corporation's other affiliates, or both; and
15       (c) It is licensed as a captive insurer by the jurisdiction in
16   which it is domiciled.


17       NEW SECTION. Sec. 4. (1) Within one hundred twenty days after
18   the effective date of this section, a Washington captive insurer must
19   register with the commissioner. Upon furnishing evidence of good
20   standing in its state of domicile and paying a tax of two thousand
21   five hundred dollars, a Washington captive insurer is entitled to
22   receive a certificate of captive authority as a registered Washington
23   captive insurer. No other documents, deposits, or payments may be
24   required to obtain this certificate.
25       (2) A registered Washington captive insurer may renew its
26   certificate of captive authority for successive periods of twelve
27   months each by paying a tax not to exceed two thousand five hundred
28   dollars for each such period.
29       (3) A registered Washington captive insurer is not liable for
30   premium tax. No direct placement, self-procurement, or similar tax
31   may be levied on the payment of premiums to a registered Washington
32   captive insurer.


33       NEW SECTION.    Sec. 5.      (1) A registered Washington captive
34   insurer may provide insurance to a parent corporation that has its
35   principal   place  of   business   in  this  state,  to  the  parent
36   corporation's other affiliates, or both.



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 1       (2) A registered Washington captive insurer may insure risks of
 2   its affiliates and obtain or provide reinsurance for risks insured in
 3   this state.


 4       Sec. 6.   RCW 48.14.020 and 2016 c 133 s 1 are each amended to
 5   read as follows:
 6       (1) Subject to other provisions of this chapter, each authorized
 7   insurer except title insurers and registered Washington captive
 8   insurers as defined in section 3 of this act shall on or before the
 9   first day of March of each year pay to the state treasurer through
10   the commissioner's office a tax on premiums. Except as provided in
11   subsection (3) of this section, such tax shall be in the amount of
12   two percent of all premiums, excluding amounts returned to or the
13   amount of reductions in premiums allowed to holders of industrial
14   life policies for payment of premiums directly to an office of the
15   insurer, collected or received by the insurer under RCW 48.14.090
16   during the preceding calendar year other than ocean marine and
17   foreign   trade  insurances,   after   deducting  premiums   paid   to
18   policyholders as returned premiums, upon risks or property resident,
19   situated, or to be performed in this state. For tax purposes, the
20   reporting of premiums shall be on a written basis or on a paid-for
21   basis consistent with the basis required by the annual statement. For
22   the purposes of this section the consideration received by an insurer
23   for the granting of an annuity shall not be deemed to be a premium.
24       (2)(a) The taxes imposed in this section do not apply to amounts
25   received by any life and disability insurer for health care services
26   included within the definition of practice of dentistry under RCW
27   18.32.020 except amounts received for pediatric oral services that
28   qualify as coverage for the minimum essential coverage requirement
29   under P.L. 111-148 (2010), as amended, and for stand-alone family
30   dental plans as defined in RCW 43.71.080(4)(a), only when offered in
31   the individual market((,)) as defined in RCW 48.43.005(((27))), or to
32   a small group((,)) as defined in RCW 48.43.005(((33))).
33       (b) Beginning January 1, 2014, moneys collected for premiums
34   written on qualified health benefit plans and qualified dental plans
35   offered through the health benefit exchange under chapter 43.71 RCW
36   must be deposited in the health benefit exchange account under RCW
37   43.71.060.
38       (3) In the case of insurers which require the payment by their
39   policyholders at the inception of their policies of the entire
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 1   premium thereon in the form of premiums or premium deposits which are
 2   the same in amount, based on the character of the risks, regardless
 3   of the length of term for which such policies are written, such tax
 4   shall be in the amount of two percent of the gross amount of such
 5   premiums and premium deposits upon policies on risks resident,
 6   located, or to be performed in this state, in force as of the thirty-
 7   first day of December next preceding, less the unused or unabsorbed
 8   portion of such premiums and premium deposits computed at the average
 9   rate thereof actually paid or credited to policyholders or applied in
10   part payment of any renewal premiums or premium deposits on one-year
11   policies expiring during such year.
12       (4) Each authorized insurer shall with respect to all ocean
13   marine and foreign trade insurance contracts written within this
14   state during the preceding calendar year, on or before the first day
15   of March of each year pay to the state treasurer through the
16   commissioner's office a tax of ninety-five one-hundredths of one
17   percent on its gross underwriting profit. Such gross underwriting
18   profit shall be ascertained by deducting from the net premiums (i.e.,
19   gross premiums less all return premiums and premiums for reinsurance)
20   on such ocean marine and foreign trade insurance contracts the net
21   losses paid (i.e., gross losses paid less salvage and recoveries on
22   reinsurance ceded) during such calendar year under such contracts. In
23   the case of insurers issuing participating contracts, such gross
24   underwriting profit shall not include, for computation of the tax
25   prescribed by this subsection, the amounts refunded, or paid as
26   participation dividends, by such insurers to the holders of such
27   contracts.
28       (5) The state does hereby preempt the field of imposing excise or
29   privilege taxes upon insurers or their appointed insurance producers,
30   other than title insurers, and no county, city, town or other
31   municipal subdivision shall have the right to impose any such taxes
32   upon such insurers or these insurance producers.
33       (6) If an authorized insurer collects or receives any such
34   premiums on account of policies in force in this state which were
35   originally issued by another insurer and which other insurer is not
36   authorized to transact insurance in this state on its own account,
37   such collecting insurer shall be liable for and shall pay the tax on
38   such premiums.



                                     p. 4                          SB 6331
 1       Sec. 7.   RCW 48.14.095 and 2008 c 217 s 8 are each amended to
 2   read as follows:
 3       (1) This section applies to any insurer or taxpayer, as defined
 4   in RCW 48.14.0201, violating or failing to comply with RCW
 5   48.05.030(1),    48.17.060,     48.36A.290(1),   48.44.015(1),    or
 6   48.46.027(1).
 7       (2) Except as provided in subsection (7) of this section, RCW
 8   48.14.020, 48.14.0201, and 48.14.060 apply to insurers or taxpayers
 9   identified in subsection (1) of this section.
10       (3) If an insurance contract, health care services contract, or
11   health maintenance agreement covers risks or exposures, or enrolled
12   participants only partially in this state, the tax payable is
13   computed on the portion of the premium that is properly allocated to
14   a risk or exposure located in this state, or enrolled participants
15   residing in this state.
16       (4) In determining the amount of taxable premiums under
17   subsection (3) of this section, all premiums, other than premiums
18   properly allocated or apportioned and reported as taxable premiums of
19   another state, that are written, procured, or received in this state,
20   or that are for a policy or contract negotiated in this state, are
21   considered to be written on risks or property resident, situated, or
22   to be performed in this state, or for health care services to be
23   provided to enrolled participants residing in this state.
24       (5) Insurance on risks or property resident, situated, or to be
25   performed in this state, or health coverage for the provision of
26   health care services for residents of this state, is considered to be
27   insurance procured, continued, renewed, or performed in this state,
28   regardless of the location from which the application is made, the
29   negotiations are conducted, or the premiums are remitted.
30       (6) Premiums on risks or exposures that are properly allocated to
31   federal waters or international waters or under the jurisdiction of a
32   foreign government are not taxable by this state.
33       (7) This section does not apply to premiums on insurance procured
34   by a licensed surplus line broker under chapter 48.15 RCW or premiums
35   on insurance issued by a Washington captive insurer as defined in
36   section 3 of this act.


37       Sec. 8.   RCW 48.15.160 and 2008 c 217 s 11 are each amended to
38   read as follows:


                                     p. 5                          SB 6331
 1       (1) The provisions of this chapter controlling the placing of
 2   insurance with unauthorized insurers shall not apply to reinsurance,
 3   to insurance placed with a Washington captive insurer as defined in
 4   section 3 of this act, or to the following insurances when so placed
 5   by licensed insurance producers of this state:
 6       (a) Ocean marine and foreign trade insurances.
 7       (b) Insurance on subjects located, resident, or to be performed
 8   wholly outside of this state, or on vehicles or aircraft owned and
 9   principally garaged outside this state.
10       (c)   Insurance   on   operations   of    railroads  engaged   in
11   transportation in interstate commerce and their property used in such
12   operations.
13       (d) Insurance of aircraft owned or operated by manufacturers of
14   aircraft, or of aircraft operated in schedule interstate flight, or
15   cargo of such aircraft, or against liability, other than workers'
16   compensation and employer's liability, arising out of the ownership,
17   maintenance or use of such aircraft.
18       (2) Insurance producers so placing any such insurance with an
19   unauthorized insurer shall keep a full and true record of each such
20   coverage in detail as required of surplus line insurance under this
21   chapter and shall meet the requirements imposed upon a surplus line
22   broker pursuant to RCW 48.15.090 and any regulations adopted
23   thereunder. The record shall be preserved for not less than five
24   years from the effective date of the insurance and shall be kept
25   available in this state and open to the examination of the
26   commissioner.   The   insurance  producer   shall   furnish  to   the
27   commissioner at the commissioner's request and on forms as designated
28   and furnished by him or her a report of all such coverages so placed
29   in a designated calendar year.

30       Sec. 9. RCW 82.04.320 and 1961 c 15 s 82.04.320 are each amended
31   to read as follows:
32       This chapter shall not apply to any person in respect to
33   insurance business upon which a tax based on gross premiums is paid
34   to the state or to any Washington captive insurer as defined in
35   section 3 of this act: PROVIDED, That the provisions of this section
36   shall not exempt any person engaging in the business of representing
37   any insurance company, whether as general or local agent, or acting
38   as broker for such companies: PROVIDED FURTHER, That the provisions
39   of this section shall not exempt any bonding company from tax with
                                     p. 6                          SB 6331
1    respect to gross income derived from the completion of any contract
2    as to which it is a surety, or as to any liability as successor to
3    the liability of the defaulting contractor.


 4       NEW SECTION.    Sec. 10.     Sections   1   through   5   of   this   act
 5   constitute a new chapter in Title 48 RCW.

6        NEW SECTION.   Sec. 11.   Sections 6 through 9 of this act apply
7    both retroactively and prospectively.


 8       NEW SECTION.    Sec. 12.   If any provision of this act or its
 9   application to any person or circumstance is held invalid, the
10   remainder of the act or the application of the provision to other
11   persons or circumstances is not affected.


12       NEW SECTION. Sec. 13. This act is necessary for the immediate
13   preservation of the public peace, health, or safety, or support of
14   the state government and its existing public institutions, and takes
15   effect immediately.

                                  --- END ---




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