Starbucks, Alaska Air captive insurers ordered to stop insuring risk in Washington state
Washington Insurance Commissioner Mike Kreidler ordered unauthorised insurers Olympic Casualty Insurance Co and ASA Assurance to stop insuring risk in Washington state for their parent companies, Starbucks and Alaska Air Group. The order against Olympic Casualty Insurance Co has been stayed pending an administrative hearing.
Both companies are captive insurers, which are not authorised under Washington state law. Companies must buy insurance from an admitted insurer or through a licensed surplus line broker, and they must pay a 2 percent premium tax on the insurance they buy. The tax revenue is sent to the state general fund to pay for government operations.
In September 2019, Kreidler ordered ASA Assurance, a captive insurer for Alaska Air Group, to pay more than $2.5 million in unpaid premium tax and penalties owed to Washington state. ASA issued four policies for Alaska Air Group and its subsidiaries, Alaska Airlines, Horizon Air Industries, and McGee Air Services, collecting $91 million in premiums. ASA demanded a hearing, set for July 13, 2020.
In December 2019, Kriedler ordered Olympic Casualty Insurance Co., a captive insurer for Starbucks, to pay $22.8 million in unpaid premium taxes, interest, and penalties and a $1.1 million fine. Olympic issued 44 policies in Washington state from 2008 until 2019, collecting $633.4 million in premiums. Olympic demanded a hearing; the prehearing conference is January 14, 2020. A stay is in place for the fine and the order to cease and desist pending the outcome of the hearing.
Kreidler is pursuing captive insurers for failing to pay premium tax to the state. He set up a self-reporting plan for captives in December 2018 that offered tiered fines to encourage early repayment of past due taxes.
To date, 16 captives have self-reported and two captives have paid $2.9 million in unpaid premium taxes and $1.4 million in fines, tax penalties and interest.
