Captive insurers/PUDs

AN ACT Relating to allowing public utility districts to form, 1
own, or use captive insurers; amending RCW 48.62.011, 48.62.031, and 2
48.201.020; and adding a new section to chapter 54.04 RCW.3
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:4
Sec. 1. RCW 48.62.011 and 2019 c 26 s 1 are each amended to read 5
as follows: 6
(1) This chapter is intended to provide the exclusive source of 7
local government entity authority to individually or jointly self-8
insure risks, jointly purchase insurance or reinsurance, become a 9
captive owner as defined in RCW 48.201.020, and to contract for risk 10
management, claims, and administrative services. This chapter shall 11
be liberally construed to grant local government entities maximum 12
flexibility in self-insuring to the extent the self-insurance 13
programs are operated in a safe and sound manner. This chapter is 14
intended to require prior approval for the establishment of every 15
individual local government self-insured employee health and welfare 16
benefit program and every joint local government self-insurance 17
program. In addition, this chapter is intended to require every local 18
government entity that establishes a self-insurance program not 19
subject to prior approval to notify the state of the existence of the 20
program and to comply with the regulatory and statutory standards 21
H-1098.2
HOUSE BILL 1842
State of Washington 69th Legislature 2025 Regular Session
By Representatives Steele and Barnard
Read first time 02/05/25. Referred to Committee on Environment &
Energy.
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governing the management and operation of the programs as provided in 1
this chapter. This chapter is not intended to authorize or regulate 2
self-insurance of unemployment compensation under chapter 50.44 RCW, 3
or industrial insurance under chapter 51.14 RCW. 4
(2) This chapter is further intended to enable the board of 5
pilotage commissioners to participate in a local government joint 6
self-insurance program covering liability risks. 7
Sec. 2. RCW 48.62.031 and 2019 c 26 s 3 are each amended to read 8
as follows: 9
(1) The governing body of a local government entity may 10
individually self-insure, may join or form a self-insurance program 11
together with other entities, including the board of pilotage 12
commissioners, and may jointly purchase insurance or reinsurance with 13
those other entities for property and liability risks, and health and 14
welfare benefits only as permitted under this chapter. In addition, 15
the entity or entities may contract for or hire personnel to provide 16
risk management, claims, and administrative services in accordance 17
with this chapter. 18
(2) The agreement to form a joint self-insurance program shall be 19
made under chapter 39.34 RCW and may create a separate legal or 20
administrative entity with powers delegated thereto.21
(3) Every individual and joint self-insurance program is subject 22
to audit by the state auditor. 23
(4) If provided for in the agreement or contract established 24
under chapter 39.34 RCW, a joint self-insurance program may, in 25
conformance with this chapter: 26
(a) Contract or otherwise provide for risk management and loss 27
control services; 28
(b) Contract or otherwise provide legal counsel for the defense 29
of claims and other legal services; 30
(c) Consult with the state insurance commissioner and the state 31
risk manager; 32
(d) Jointly purchase insurance and reinsurance coverage in such 33
form and amount as the program's participants agree by contract;34
(e) Obligate the program's participants to pledge revenues or 35
contribute money to secure the obligations or pay the expenses of the 36
program, including the establishment of a reserve or fund for 37
coverage; and 38
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(f) Possess any other powers and perform all other functions 1
reasonably necessary to carry out the purposes of this chapter.2
(5) A self-insurance program formed and governed under this 3
chapter that has decided to assume a risk of loss must have available 4
for inspection by the state auditor a written report indicating the 5
class of risk or risks the governing body of the entity has decided 6
to assume. 7
(6) Every joint self-insurance program governed by this chapter 8
shall appoint the risk manager as its attorney to receive service of, 9
and upon whom shall be served, all legal process issued against it in 10
this state upon causes of action arising in this state.11
(a) Service upon the risk manager as attorney shall constitute 12
service upon the program. Service upon joint insurance programs 13
subject to chapter 30, Laws of 1991 sp. sess. can be had only by 14
service upon the risk manager. At the time of service, the plaintiff 15
shall pay to the risk manager a fee to be set by the risk manager, 16
taxable as costs in the action. 17
(b) With the initial filing for approval with the risk manager, 18
each joint self-insurance program shall designate by name and address 19
the person to whom the risk manager shall forward legal process so 20
served upon him or her. The joint self-insurance program may change 21
such person by filing a new designation. 22
(c) The appointment of the risk manager as attorney shall be 23
irrevocable, shall bind any successor in interest or to the assets or 24
liabilities of the joint self-insurance program, and shall remain in 25
effect as long as there is in force in this state any contract made 26
by the joint self-insurance program or liabilities or duties arising 27
therefrom. 28
(d) The risk manager shall keep a record of the day and hour of 29
service upon him or her of all legal process. A copy of the process, 30
by registered mail with return receipt requested, shall be sent by 31
the risk manager, to the person designated for the purpose by the 32
joint self-insurance program in its most recent such designation 33
filed with the risk manager. No proceedings shall be had against the 34
joint self-insurance program, and the program shall not be required 35
to appear, plead, or answer, until the expiration of forty days after 36
the date of service upon the risk manager. 37
(7) Public utility districts established under Title 54 RCW may 38
form, own, or use captive insurers in accordance with chapter 48.201 39
RCW.40
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Sec. 3. RCW 48.201.020 and 2021 c 281 s 2 are each amended to 1
read as follows: 2
The definitions in this section apply throughout this chapter 3
unless the context clearly requires otherwise. 4
(1) "Affiliate" means an entity directly or indirectly 5
controlling, controlled by, or under common control with another 6
entity, such as a parent or a subsidiary corporation. "Affiliate" 7
also means any person that holds an insured interest because that 8
person has or had an employment or sales contract with an insured 9
person. 10
(2) "Captive owner" means one of the following:11
(a) An entity that is organized under Title 23B, 24, or 25 RCW, 12
or analogous provisions of the law of another state or territory; 13
((or))14
(b) A public institution of higher education; or15
(c) A municipal corporation organized under Title 54 RCW.16
(3) "Casualty insurance" has the same meaning as "general 17
casualty insurance" as defined in RCW 48.11.070. 18
(4) "Control" means possession of the power to direct the 19
management and policies of an entity through ownership of voting 20
securities, by contract, or otherwise. 21
(5) "Eligible captive insurer" means an insurance company with 22
the following characteristics: 23
(a) It is wholly or partially owned by a captive owner or, by 24
contract, the captive owner is a participant or member of the 25
insurance company; 26
(b) It insures risks of the captive owner, the captive owner's 27
other affiliates, or both; 28
(c) One or more of its insureds have their principal place of 29
business in Washington; 30
(d) It has assets that exceed its liabilities by at least 31
$1,000,000 and has the ability to pay its debts as they come due, 32
both as verified by audited financial statements prepared by an 33
independent certified accountant; and 34
(e) It is licensed as a captive insurer by the jurisdiction in 35
which it is domiciled. 36
(6) "Property insurance" has the same meaning as in RCW 37
48.11.040. 38
(7) "Public institution of higher education" means an institution 39
of higher education as defined in RCW 28B.10.016. 40
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NEW SECTION. Sec. 4. A new section is added to chapter 54.04 1
RCW to read as follows: 2
A public utility district may be a captive owner as defined in 3
RCW 48.201.020. 4
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