Wash. insurance head orders Alaska Air captive to pay fine

Washington state Insurance Commissioner Mike Kreidler on Tuesday ordered ASA Assurance Inc., the Hawaii-domiciled captive of Alaska Air Group Inc., to pay more than $2.5 million in unpaid premium tax and penalties for the unauthorized sale of insurance in the state.

The Seattle-based airline is challenging the Commissioner’s efforts to impose fines and recently demanded a hearing before an administrative law judge on the matter.

A prehearing telephone conference has been scheduled for Sept. 30, the Insurance Commissioner’s office said in a statement Tuesday.

ASA Assurance 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 Insurance Commissioner’s office said.

“ASA is not admitted to sell insurance in Washington state,” it said.

Alaska Airlines did not immediately respond to a request for comment.

Mr. Kreidler has been engaged in an initiative to allow captives that he believes 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.

To date, 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, the Insurance Commissioner’s office said.

Alaska Airlines’ demand for a hearing raises four issues: whether the commissioner has the authority to regulate self-insurance, whether ASA Assurance is engaged in the business of making contracts for insurance and therefore covered by the state’s insurance code’s definition of an insurer, whether ASA Assurance is within the scope of the commissioner’s authority under the McCarran-Ferguson Act, and whether the commissioner has the authority to impose premium taxes related to risks insured outside of the state.