The Arkansas state Board of Finance on Thursday authorized the submission of an application to the state Insurance Department to establish a captive insurance company that will provide property insurance for the state’s public schools, higher education institutions, and state agencies.
Grant Wallace, director of the state’s Employee Benefits Division, told the Board that the Insurance Department will review the application and is expected to approve it before July 1. Following approval, the state Board of Finance will review and approve the captive operational and investment plan. The newly renamed Department of Shared Administrative Services will then administer the captive insurance program on a daily basis starting July 1.
The creation of this captive insurance company is a result of Acts 560 and 779 of 2025, which established the State Captive Insurance Program. This legislation combines all state agencies, public schools, and higher education facilities into one property insurance captive. The laws were enacted after lawmakers studied ways to reduce rising property insurance premiums for public schools. In July 2023, the Legislative Council approved Governor Sarah Huckabee Sanders’ request for $11 million in one-time state funds to help school districts pay for these increasing premiums.
Currently, the state self-insures all state agency property, higher education property, and about half of public school district properties through the state Department of Insurance program. These administrative functions will be transferred to the Department of Shared Administrative Services starting July 1. The State Captive Insurance Program will be funded with $136 million in one-time state funds.
The captive insurance company will be owned and controlled by the state, allowing it to work directly with commercial insurance companies without third-party vendors. The state will cap its exposure to the first $50 million in claims. According to Wallace, this approach will achieve risk financing objectives by dealing directly with the reinsurance marketplace, securing competitive rates, and incorporating savings into plan management and pricing.
Projections presented to the state Board of Finance show total gross premiums of $101.7 million for each of the next two years, with total underwriting deductions of $88 million in the first year and $90.7 million in the second year. The projections also indicate a surplus of $150.9 million at the end of the first year and $164 million at the end of the second year.
A key benefit of the new program is that the rate charged to entities will remain flat from the current year to the next. Any premium increases will result from changes in property valuations reported in March 2025. There will be a phase-in period for public schools regarding deductibles over the next two years. School districts with less than $100 million in total insured assets will have a $25,000 deductible per occurrence district-wide, while those with more than $100 million will have a $50,000 deductible. State agencies and higher education institutions will have a $250,000 deductible.
The goal of the program is to balance stability with appropriate market and insured values. Wallace stated that the state aims to maintain level entity costs while expanding coverage options and securing more competitive rates.
In related developments, the Legislative Council’s Executive Subcommittee approved agreements with Stephens Insurance LLC to serve as an insurance broker and consultant, and with Willis Towers Watson Management Ltd. to provide captive management and consultancy services.
