Washington State Issues Regulations Implementing New Captive Tax Law

The Office of the Insurance Commissioner for Washington State has issued draft regulations to implement legislation state lawmakers passed in April that sets new requirements for captive insurance companies licensed in other domiciles but doing business in the state of Washington.

Under the new law, captives licensed elsewhere and operating in the state are required to pay an initial registration fee of $2,500, with the state insurance commissioner granted the authority to set the annual fee, which is not to exceed $2,500.

The proposed regulations make it clear that captive insurance companies will have to pay by March 1 of each year a 2 percent tax on premiums for coverage provided to their parents or other affiliates for Washington risks during the previous calendar year.

In addition, the proposed rules note that captives doing business in the state cannot offer medical stop-loss coverage.

The proposed rules also affirm that captives that insured Washington risks for any period after January 1, 2011, must—if they haven't already—pay a 2 percent premium tax on that coverage.

Earlier, Washington State insurance regulators described the new law as a fair compromise in which captives licensed in other domiciles could operate in the state while paying a fair share of insurance premium taxes.