PSSB 6331 - Captive Insurance and Independently Procured Commercial Insurance, Mullet Pink
Summary
PSSB 6331, labeled Mullet Pink, is an act relating to captive insurance and independently procured commercial insurance, amending RCW 48.14.020, 48.14.095 and 48.15.160 and prescribing penalties. The findings state that a framework for Washington corporations to manage risks through captive insurers will facilitate the growth and safety of those businesses and protect the public interest. Section 3 limits the ability to independently procure insurance in this state to persons who qualify either as an exempt commercial purchaser or as an affiliate of a Washington captive insurer. The text ends with a provision declaring the act necessary for the immediate preservation of the public peace, health, or safety, effective immediately.
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“PSSB 6331 - Captive Insurance and Independently Procured Commercial Insurance, Mullet Pink.”
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PSSB 6331
Mullet
Pink
1 AN ACT Relating to captive insurance and independently procured
2 commercial insurance; amending RCW 48.14.020, 48.14.095, and
3 48.15.160; adding a new chapter to Title 48 RCW; creating a new
4 section; prescribing penalties; and declaring an emergency.
5 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:
6 NEW SECTION. Sec. 1. The legislature finds that creating a
7 framework for Washington corporations to manage their risks through
8 captive insurers will facilitate the growth and safety of those
9 businesses and protect the public interest. The legislature further
10 finds that captive insurance promotes prudent risk management and
11 provides access to insurance and reinsurance markets that may not be
12 available to Washington businesses otherwise. The legislature
13 believes that encouraging the use of captive insurance will support
14 those who rely upon the strength and stability of employers in this
15 state.
16 NEW SECTION. Sec. 2. The definitions in this section apply
17 throughout this chapter unless the context clearly requires
18 otherwise.
19 (1) "Affiliate" means an entity directly or indirectly
20 controlling, controlled by, or under common control with another
Code Rev/AV:jlb 1 S-5878.1/20
1 entity. "Affiliate" also means any person that holds an insured
2 interest because that person has or had an employment or sales
3 contract with an insured person.
4 (2) "Control" means possession of the power to direct the
5 management and policies of an entity through ownership of voting
6 securities, by contract, or otherwise.
7 (3) "Exempt commercial purchaser" has the same meaning as
8 provided in RCW 48.15.010.
9 (4) "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. 3. (1) The ability to independently procure
18 insurance in this state is limited to persons who qualify either as
19 an exempt commercial purchaser or as an affiliate of a Washington
20 captive insurer.
21 (2) Prior to independently procuring insurance in this state, a
22 person other than an affiliate of a Washington captive insurer must
23 establish that they qualify as an exempt commercial purchaser. To
24 establish that a person qualifies as an exempt commercial purchaser,
25 the person must file a form, in the format prescribed by the
26 commissioner, attesting that the person qualifies as an exempt
27 commercial purchaser and providing additional information as required
28 by the commissioner. The commissioner may request records to confirm
29 that the person qualifies as an exempt commercial purchaser.
30 (3) Every exempt commercial purchaser whose home state is
31 Washington state and who procures, causes to be procured, continues,
32 or renews insurance with an unauthorized insurer, including a person
33 or self-insurer who procures or continues excess loss, catastrophe,
34 or other insurance, upon a subject of insurance that is resident,
35 located, or to be performed in this state, other than insurance
36 lawfully procured through a surplus lines broker under chapter 48.15
37 RCW, must within sixty days after the date the insurance was bound or
38 the effective date of the insurance, whichever is later, file a
39 report with the commissioner in a form prescribed by the
Code Rev/AV:jlb 2 S-5878.1/20
1 commissioner. The report must show the name and address of the exempt
2 commercial purchaser, name and address of the unauthorized insurer, a
3 general description of the coverage, the binding or effective date,
4 the policy number, the amount of premium currently charged, and
5 additional pertinent information required by the commissioner. The
6 exempt commercial purchaser must attach the policy declaration pages
7 to the report.
8 (4) Persons who qualify as exempt commercial purchasers may
9 independently procure unauthorized insurance that is properly
10 classified as property insurance under RCW 48.11.040 or general
11 casualty insurance under RCW 48.11.070.
12 NEW SECTION. Sec. 4. (1) An exempt commercial purchaser must,
13 on or before the first day of March of each year, file with the
14 commissioner a verified statement of all independently procured
15 insurance transacted during the preceding calendar year.
16 (2) The statement must be in a form and format as prescribed by
17 the commissioner and must show:
18 (a) Aggregate of net premiums; and
19 (b) Additional information as required by the commissioner.
20 (3) This section does not apply to unauthorized property and
21 casualty insurance independently procured by an insured when the
22 insured's home state is a state other than this state, or to
23 nonprofit organizations or public entities in Washington, including
24 institutions of higher education as defined in RCW 28B.10.016.
25 NEW SECTION. Sec. 5. (1) On or before the first day of March of
26 each year, an exempt commercial purchaser must remit to the state
27 treasurer through the commissioner a tax on the premiums, exclusive
28 of sums collected to cover federal and state taxes and examination
29 fees, on independently procured insurance subject to tax transacted
30 by the exempt commercial purchaser during the preceding calendar
31 year, as shown by the annual statement filed with the commissioner,
32 and at the same rates as are applicable to the premiums of authorized
33 foreign insurers under this code. The tax when collected must be
34 credited to the general fund.
35 (2) For property and casualty insurance other than industrial
36 insurance under Title 51 RCW, when this state is the exempt
37 commercial purchaser's home state, the exempt commercial purchaser
38 must pay premium taxes in accordance with the following:
Code Rev/AV:jlb 3 S-5878.1/20
1 (a) If the independently procured insurance covers risk or
2 exposures located inside of the United States, its territories, or
3 both, the tax so payable must be computed upon the entire premium
4 under subsection (1) of this section, without regard to whether the
5 policy covers risk or exposures that are located in this state; and
6 (b) If the independently procured insurance covers risk or
7 exposures located outside of the United States and its territories,
8 no tax under subsection (1) of this section is due or payable for the
9 premium properly allocable to the risks and exposures located outside
10 the United States and its territories.
11 (3) This section does not apply to nonprofit organizations or
12 public entities in Washington, including institutions of higher
13 education as defined in RCW 28B.10.016.
14 NEW SECTION. Sec. 6. (1) An exempt commercial purchaser who
15 fails to file a report as required by the commissioner in section
16 3(3) of this act is subject to a one thousand dollar fine, per
17 violation.
18 (2) If an exempt commercial purchaser fails to file the annual
19 statement and fails to remit the tax provided by section 5 of this
20 act, by the last day of the month in which the tax becomes due, the
21 exempt commercial purchaser must pay the penalties and interest
22 provided in RCW 48.14.060. The tax may be collected by distraint, or
23 the tax and fine may be recovered by an action instituted by the
24 commissioner in any court of competent jurisdiction. Any fine
25 collected by the commissioner must be paid to the state treasurer and
26 credited to the general fund.
27 (3) This section does not apply to nonprofit organizations or
28 public entities in Washington, including institutions of higher
29 education as defined in RCW 28B.10.016.
30 NEW SECTION. Sec. 7. (1) Within one hundred twenty days after
31 the effective date of this section, a Washington captive insurer must
32 register with the commissioner. Upon furnishing evidence of good
33 standing in its state of domicile and paying a tax of two thousand
34 five hundred dollars, a Washington captive insurer is entitled to
35 receive a certificate of captive authority as a registered Washington
36 captive insurer. No other documents, deposits, or payments may be
37 required to obtain this certificate.
Code Rev/AV:jlb 4 S-5878.1/20
1 (2) A registered Washington captive insurer may renew its
2 certificate of captive authority for successive periods of twelve
3 months each by paying a tax not to exceed two thousand five hundred
4 dollars for each such period.
5 (3) A registered Washington captive insurer may provide insurance
6 to a parent corporation that has its principal place of business in
7 this state, to the parent corporation's other affiliates, or both.
8 (4) A registered Washington captive insurer may insure risks of
9 its affiliates and obtain or provide reinsurance for risks insured in
10 this state.
11 NEW SECTION. Sec. 8. (1) On or before the first day of March of
12 each year, a registered Washington captive insurer must remit to the
13 state treasurer through the commissioner a tax in the amount of two
14 percent of the premiums, exclusive of returned premiums and sums
15 collected to cover federal and state taxes and examination fees, for
16 insurance directly procured by and provided to its parent or another
17 affiliate for Washington risks during the preceding calendar year.
18 The tax when collected must be credited to the general fund.
19 (2) For the purposes of this section, "Washington risks" means
20 the share of risk covered by the premiums that is allocable to this
21 state, based upon where the underlying risks are located or where the
22 losses or injuries giving rise to covered claims arise. The captive
23 insurer may use any reasonable method of determining such an
24 allocation, including actuarial analysis or use of a proxy such as
25 sales, property value, or payroll. It is irrelevant to the
26 determination of Washington risks whether a claim is paid directly by
27 the captive insurer or whether the captive insurer indemnifies its
28 insured after the insured makes a payment related to the claim.
29 "Washington risks" do not include any risks covered by industrial
30 insurance under Title 51 RCW.
31 (3) If a registered Washington captive insurer fails to remit the
32 tax provided by this section by the last day of the month in which
33 the tax becomes due, the registered Washington captive insurer must
34 pay the penalties and interest provided in RCW 48.14.060. The tax may
35 be collected by distraint, or the tax and fine may be recovered by an
36 action instituted by the commissioner in any court of competent
37 jurisdiction. Any fine collected by the commissioner must be paid to
38 the state treasurer and credited to the general fund.
Code Rev/AV:jlb 5 S-5878.1/20
1 NEW SECTION. Sec. 9. The commissioner may adopt rules as
2 necessary to implement this act, but such rules must recognize the
3 differences between captive insurance and commercial insurance
4 offered to Washington insureds by unrelated companies.
5 Sec. 10. RCW 48.14.020 and 2016 c 133 s 1 are each amended to
6 read as follows:
7 (1) Subject to other provisions of this chapter, each authorized
8 insurer except title insurers and registered Washington captive
9 insurers as defined in section 2 of this act shall on or before the
10 first day of March of each year pay to the state treasurer through
11 the commissioner's office a tax on premiums. Except as provided in
12 subsection (3) of this section, such tax shall be in the amount of
13 two percent of all premiums, excluding amounts returned to or the
14 amount of reductions in premiums allowed to holders of industrial
15 life policies for payment of premiums directly to an office of the
16 insurer, collected or received by the insurer under RCW 48.14.090
17 during the preceding calendar year other than ocean marine and
18 foreign trade insurances, after deducting premiums paid to
19 policyholders as returned premiums, upon risks or property resident,
20 situated, or to be performed in this state. For tax purposes, the
21 reporting of premiums shall be on a written basis or on a paid-for
22 basis consistent with the basis required by the annual statement. For
23 the purposes of this section the consideration received by an insurer
24 for the granting of an annuity shall not be deemed to be a premium.
25 (2)(a) The taxes imposed in this section do not apply to amounts
26 received by any life and disability insurer for health care services
27 included within the definition of practice of dentistry under RCW
28 18.32.020 except amounts received for pediatric oral services that
29 qualify as coverage for the minimum essential coverage requirement
30 under P.L. 111-148 (2010), as amended, and for stand-alone family
31 dental plans as defined in RCW 43.71.080(4)(a), only when offered in
32 the individual market, as defined in RCW 48.43.005(((27))), or to a
33 small group, as defined in RCW 48.43.005(((33))).
34 (b) Beginning January 1, 2014, moneys collected for premiums
35 written on qualified health benefit plans and qualified dental plans
36 offered through the health benefit exchange under chapter 43.71 RCW
37 must be deposited in the health benefit exchange account under RCW
38 43.71.060.
Code Rev/AV:jlb 6 S-5878.1/20
1 (3) In the case of insurers which require the payment by their
2 policyholders at the inception of their policies of the entire
3 premium thereon in the form of premiums or premium deposits which are
4 the same in amount, based on the character of the risks, regardless
5 of the length of term for which such policies are written, such tax
6 shall be in the amount of two percent of the gross amount of such
7 premiums and premium deposits upon policies on risks resident,
8 located, or to be performed in this state, in force as of the thirty-
9 first day of December next preceding, less the unused or unabsorbed
10 portion of such premiums and premium deposits computed at the average
11 rate thereof actually paid or credited to policyholders or applied in
12 part payment of any renewal premiums or premium deposits on one-year
13 policies expiring during such year.
14 (4) Each authorized insurer shall with respect to all ocean
15 marine and foreign trade insurance contracts written within this
16 state during the preceding calendar year, on or before the first day
17 of March of each year pay to the state treasurer through the
18 commissioner's office a tax of ninety-five one-hundredths of one
19 percent on its gross underwriting profit. Such gross underwriting
20 profit shall be ascertained by deducting from the net premiums (i.e.,
21 gross premiums less all return premiums and premiums for reinsurance)
22 on such ocean marine and foreign trade insurance contracts the net
23 losses paid (i.e., gross losses paid less salvage and recoveries on
24 reinsurance ceded) during such calendar year under such contracts. In
25 the case of insurers issuing participating contracts, such gross
26 underwriting profit shall not include, for computation of the tax
27 prescribed by this subsection, the amounts refunded, or paid as
28 participation dividends, by such insurers to the holders of such
29 contracts.
30 (5) The state does hereby preempt the field of imposing excise or
31 privilege taxes upon insurers or their appointed insurance producers,
32 other than title insurers, and no county, city, town or other
33 municipal subdivision shall have the right to impose any such taxes
34 upon such insurers or these insurance producers.
35 (6) If an authorized insurer collects or receives any such
36 premiums on account of policies in force in this state which were
37 originally issued by another insurer and which other insurer is not
38 authorized to transact insurance in this state on its own account,
39 such collecting insurer shall be liable for and shall pay the tax on
40 such premiums.
Code Rev/AV:jlb 7 S-5878.1/20
1 Sec. 11. 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.
35 (8) This section does not apply to premiums on insurance that is
36 either independently procured by an exempt commercial purchaser or
37 issued by a Washington captive insurer under chapter 48.--- RCW (the
38 new chapter created in section 13 of this act).
Code Rev/AV:jlb 8 S-5878.1/20
1 Sec. 12. RCW 48.15.160 and 2008 c 217 s 11 are each amended to
2 read as follows:
3 (1) The provisions of this chapter controlling the placing of
4 insurance with unauthorized insurers shall not apply to reinsurance,
5 to insurance independently procured by an exempt commercial purchaser
6 or issued by a Washington captive insurer under chapter 48.--- RCW
7 (the new chapter created in section 13 of this act), or to the
8 following insurances when so placed by licensed insurance producers
9 of this state:
10 (a) Ocean marine and foreign trade insurances.
11 (b) Insurance on subjects located, resident, or to be performed
12 wholly outside of this state, or on vehicles or aircraft owned and
13 principally garaged outside this state.
14 (c) Insurance on operations of railroads engaged in
15 transportation in interstate commerce and their property used in such
16 operations.
17 (d) Insurance of aircraft owned or operated by manufacturers of
18 aircraft, or of aircraft operated in schedule interstate flight, or
19 cargo of such aircraft, or against liability, other than workers'
20 compensation and employer's liability, arising out of the ownership,
21 maintenance or use of such aircraft.
22 (2) Insurance producers so placing any such insurance with an
23 unauthorized insurer shall keep a full and true record of each such
24 coverage in detail as required of surplus line insurance under this
25 chapter and shall meet the requirements imposed upon a surplus line
26 broker pursuant to RCW 48.15.090 and any regulations adopted
27 thereunder. The record shall be preserved for not less than five
28 years from the effective date of the insurance and shall be kept
29 available in this state and open to the examination of the
30 commissioner. The insurance producer shall furnish to the
31 commissioner at the commissioner's request and on forms as designated
32 and furnished by him or her a report of all such coverages so placed
33 in a designated calendar year.
34 NEW SECTION. Sec. 13. Sections 1 through 9 of this act
35 constitute a new chapter in Title 48 RCW.
36 NEW SECTION. Sec. 14. If any provision of this act or its
37 application to any person or circumstance is held invalid, the
Code Rev/AV:jlb 9 S-5878.1/20
1 remainder of the act or the application of the provision to other
2 persons or circumstances is not affected.
3 NEW SECTION. Sec. 15. Sections 10 through 12 of this act apply
4 both retroactively and prospectively.
5 NEW SECTION. Sec. 16. This act is necessary for the immediate
6 preservation of the public peace, health, or safety, or support of
7 the state government and its existing public institutions, and takes
8 effect immediately.
--- END ---
Code Rev/AV:jlb 10 S-5878.1/20
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