Arkansas Moves Forward with State-Owned Captive to Insure Public Property

The Arkansas Board of Finance recently approved an application to form a captive insurance company to provide property insurance coverage for the state's public schools, higher education institutions, and state agencies. The move follows the passage earlier this year of the State Captive Insurance Program Act, which established the legal framework for a state-owned captive aimed at consolidating and stabilizing property insurance for public-sector entities. The development was reported by Michael R. Wickline in the June 13, 2025, Arkansas Democrat-Gazette article titled "Board OKs application to establish company to provide property insurance for public schools, higher education institutions, state agencies."

According to the article, Grant Wallace, director of the state's Employee Benefits Division, told the board that the insurance department is expected to approve the captive application before July 1. Administration of the new captive will fall under the Department of Shared Administrative Services, the successor to the Department of Transformation and Shared Services, effective the same day.

Under Acts 560 and 779 of 2025, the State Captive Insurance Program requires mandatory participation from public schools, state agencies, and higher education institutions that accept state funding for their facilities. The captive will operate as a separate legal entity owned and controlled by the state and will be regulated under Arkansas' existing captive insurance statutes. Mr. Wallace explained that the captive will engage directly with the reinsurance market to secure more competitive rates and reduce reliance on commercial insurers, according to Mr. Wickline's reporting.

The article noted that the program is backed by $136 million in one-time state funding and is expected to generate gross written premiums of $101.7 million annually over its first 2 years. Underwriting deductions are projected at $88 million in year 1 and $90.7 million in year 2, resulting in anticipated year-end surpluses of $150.9 million and $164 million, respectively. According to the article, Mr. Wallace emphasized that premium rates will remain flat year over year, with any increases tied solely to changes in reported property values submitted in March.

The captive's structure and oversight provisions were outlined in the original legislation. Premium structures, actuarial assumptions, and reserve policies will be subject to review and approval by the Board of Finance, and the captive must file an annual report with the Arkansas Legislative Council. Additionally, the law prohibits participating entities from employing public insurance adjusters, citing concerns about their impact on premium increases and future market viability.

As Mr. Wickline reported, deductible levels will be phased in over 2 years. School districts with less than $100 million in insured assets will face a $25,000 deductible per occurrence, while those with more will face a $50,000 deductible. Higher education institutions and state agencies will each have a $250,000 deductible.

The legislation also provides for a transition period. By December 2025, the Arkansas Multi-Agency Insurance Trust Fund and the Public School Insurance Trust Fund will be transferred into the captive. Full operational capability is anticipated by the end of 2026. In the interim, Mr. Wallace told the Board that the state will be able to "hold entities as level as possible, expand their coverage option and secure more competitive rates," as reported in the Arkansas Democrat-Gazette.

Mr. Wickline further noted that the Legislative Council's Executive Subcommittee approved two key contracts in April: Stephens Insurance LLC will act as broker for the program, while Willis Towers Watson Management Ltd. will serve as captive manager and consultant.

With the captive's formation now underway, Arkansas joins other US jurisdictions that have established state-owned insurance structures to address rising public-sector property risks. The program was developed in response to premium volatility and is structured to give the state direct access to reinsurance markets, according to state officials.