The relatively obscure issue of captive insurance is on the election ballot now in Washington voters’ hands. Advisory Vote 38 asks whether a new tax on captive insurance policies should be kept or scrapped.
Captive insurance isn’t available to the average consumer. It’s for companies that either can’t buy casualty and liability coverage on the open market or find it costs more than they want to pay. Companies can combine to create their own policies. The concept is legal in at least 30 other states.
This year Washington legislators approved it too. Candice Myrum from the state insurance commissioner’s office testified in favor before a legislative committee in January.
“The jointly-supported legislation that’s before you today specifically authorizes Washington-based entities to use captive insurance by registering with the Office of the Insurance Commissioner and showing that they have sufficient funds to pay their liabilities and the debts that they have when they come due," she said.
It also charges a small tax on premiums that help pay for state regulation of the new industry.
The law was negotiated by legislators, the insurance commissioner’s office and business industry interests. Denny Eliason represented the Washington Responsible Employer Coalition when he spoke to the legislature in March.
“The bill before you authorizes the use of captives, but sets forth, we believe, an appropriate level of registration and oversight by the OIC," he said. "In addition, the bill calls for an appropriate level of taxation, a 2 percent premium tax on Washington-only risks. We believe this is an equitable level of taxation, under which it will be prudent for us, as Washington-headquartered companies, to use this financial tool.”
The bill sailed through both the state House and Senate with only one dissenting vote. Because it includes a new tax, voters will have their say. The money raised, expected to be around $2 million a year, goes to the state general fund. The vote is advisory only.