Washington's insurance commissioner, Mike Kreidler, has ordered ASA Assurance Inc., a captive insurer for Alaska Air Group, to pay more than $2.5 million in what he said was unpaid premium tax and penalties owed to the state for the unauthorized sale of insurance.
In a statement, Commissioner Kreidler explained that ASA Assurance is a captive insurance company formed by Alaska Air Group for the purpose of insuring its risk in states including Washington. It issued four policies for Alaska Air Group and its subsidiaries, Alaska Airlines, Inc., Horizon Air Industries, Inc., and McGee Air Services, Inc., collecting $91 million in premiums.
The commissioner asserted, however, that ASA was not admitted to sell insurance in Washington.
Washington law requires insurance companies to pay a two percent tax based on their written premiums. The tax revenue is sent to the state general fund to pay for government operations. According to the commissioner, ASA paid no premium tax on the insurance he said it unlawfully sold.
Washington does not currently license captive insurers. Companies must buy insurance from either an admitted insurer or through a licensed surplus line broker and must pay premium tax on the insurance they buy, according to Commissioner Kreidler.
The commissioner determined in December 2018 that many large Washington companies are using captives to purchase their own insurance and failing to pay premium tax. He said that his office is working to identify all captives doing business in the state. To date, he said, nine 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.
Steven A. Meyerowitz
Steven A. Meyerowitz, a Harvard Law School graduate, is the founder and president of Meyerowitz Communications Inc., a law firm marketing communications consulting company. He may be contacted at [email protected].