Costco captive insurer pays $3.6 million in back taxes, penalties
NW Re Limited has agreed to pay Washington Insurance Dept. to settle charges for several years of unauthorized activity.
Captive insurer NW Re Limited, of Phoenix, has agreed to pay the Washington Insurance Department $3.6 million to settle charges relating to unpaid premium taxes for several years of unauthorized activity.
NW Re’s sole insured and parent company is Costco Corp., headquartered in Kirkland, Washington.
Self-reported
NW Re self-reported the activity in December 2018 as part of a project announced by Mike Kreidler, the insurance commissioner, to identify all captives that insure assets in the state of Washington. NW Re provided deductible reimbursement for Costco’s liability and workers’ compensation from 2000 until 2019 without authorization, according to the Washington Insurance Department.
NW Re paid $2.4 million in unpaid premium taxes and $1.2 million in fines, tax penalties, and interest on March 8.
Commissioner’s self-reporting project
Under the commissioner’s self-reporting project, captives must self-report before June 30, 2020 to be eligible for reduced fines and premium tax penalties. Fines and penalties increase every six months for captive insurers that fail to self-report, starting July 1, 2019. Captives that do not self-report before June 30, 2020 will face the maximum fines and tax penalties, the commissioner said.
State law requires that when risk is insured in the state of Washington, it be done through an admitted insurer or through an unauthorized insurer placed through a licensed surplus line broker. State law also requires insurance companies to pay a 2% tax based on their written premiums. The tax revenue is sent to the state general fund to pay for government operations.
Steven A. Meyerowitz, Esq., is director of the Insurance Coverage Law Center (formerly FC&S Legal). He can be reached at smeyerowitz@meyerowitzcommunications.com.