Wash. issues cease-and-desist order to Microsoft captive

Washington state’s Insurance Commissioner has issued a cease-and-desist order to Microsoft Corp.’s Arizona-based captive insurer and issued a notice that it intends to collect unpaid premium taxes.

Cypress Insurance Co. was admitted as a captive insurer in Arizona on July 1, 2008, and is a pure captive insurer whose sole insured is Redmond, Washington-based Microsoft’s family of companies, according to the order issued by Commissioner Mike Kreidler on Wednesday. The captive does not hold a certificate of authority to transact insurance or a surplus line broker's license to place unauthorized insurance in the state nor is insurance coverage provided by Cypress placed through a surplus line broker licensed in Washington state, according to the order.

Cypress has collected more than $71 million in premium from Microsoft between 2013 and 2018, but Cypress has not paid premium tax to the state of Washington while insuring Microsoft during those years, representing more than S1.4 million in unpaid premium tax, according to the order.

The insurance commissioner also issued a notice that the department intends to seek collection of unpaid premium taxes from Cypress for violating the state’s insurance laws. About $611,540 in interest and penalties would accrue based on the unpaid premium tax amount to date, according to the notice.

A Microsoft spokesperson could not be immediately reached for comment.