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Costco settles Washington state captive insurance dispute


Costco Wholesale Corp.’s captive insurer will pay $3.6 million in unpaid premium taxes, penalties and a fine to settle a dispute with the Washington state insurance department, Insurance Commissioner Mike Kreidler said Monday.

Issaquah, Washington-based Costco said in a statement sent to Business Insurance on Wednesday that it voluntarily negotiated with the department once it learned of the issue.

The Washington state Office of the Insurance Commissioner said in a statement that Phoenix-based NW Re Ltd., Costco’s captive, self-reported its unauthorized activity in December 2018 as part of Mr. Kreidler’s project to identify all captives that insure assets in the state. It provided deductible reimbursement for Costco’s liability and workers compensation from 2000 until 2019 without authorization, the statement said.

The statement said Mr. Kreidler announced a project in December to identify all captives doing business in Washington state. Captives must self-report before June 30, 2020 to be eligible for reduced fines and premium tax penalties.

“We were first alerted last year that a practice we had been following for many years with respect to certain premium taxes due to the Washington Office of the Insurance Commissioner was disputed by that office,” Costco said in a statement. “We promptly and voluntarily engaged with the office and are pleased that the dispute has now been resolved.”

Washington state’s pursuit of out-of-state captives for unpaid premium taxes has caused an uproar in the captive community and raised a number of unanswered questions for stakeholders, including whether other states will follow Washington’s lead, experts say.

Microsoft Corp. has reached a settlement with the department over unpaid premium taxes for its out-of-state captive. 




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