Captives get grace period to self-report wrongful coverage in Wash.

Washington Insurance Commissioner Mike Kreidler is allowing captive insurers that have unlawfully insured any risk in the state in the past 15 years to pay a substantially reduced fine and premium tax penalty for self-reporting the activity following a settlement with Microsoft Corp. over unpaid premium taxes for its out-of-state captive.

The self-reporting period will last from Jan. 1, 2019, through June 30, 2020, according to a statement by the commissioner’s office released Monday.

Starting July 1, 2019, the fine amount and tax penalty will increase for every six months that the captive insurer waits to self-report until June 30, 2020. Mr. Kreidler will then pursue maximum fines and tax penalties against captive insurers that have unlawfully insured risk in Washington state after the 18-month grace period.

Mr. Kreidler’s office also encouraged captive insurers who insured risk in Washington more than 15 years ago to self-report those policies from Jan. 1, 2019, through June 30, 2020, without facing fines and premium taxes. If they do not self-report before June 30, 2020, Mr. Kreidler will pursue the maximum fines and tax penalties.

In May, Mr. Kreidler’s office issued a cease-and-desist order to Microsoft’s Arizona-based captive insurer and a notice that it intended to collect unpaid premium taxes. In August, the Redmond, Washington-based software giant agreed to pay $573,905 in unpaid premium taxes and $302,915 in interest and penalties, and Mr. Kreidler rescinded the order to Microsoft’s captive Cypress Insurance Co. of Phoenix to stop transacting insurance without a license and pay tax on its written premiums.