Oklahoma officials exploring captive insurance for state and local risks received backing in a formal opinion from Attorney General Gentner Drummond, who said nothing in Oklahoma law bars the state from creating and owning a captive insurer.
In Attorney General Opinion 2025-18, Drummond concluded that Oklahoma and its political subdivisions are not constitutionally prohibited from forming and owning captive insurance companies for self-insurance purposes under the Oklahoma Captive Insurance Company Act, provided the captives are structured solely to insure the risks of the public entities that own them.
Drummond addressed questions raised by the Oklahoma Insurance Department and state Rep. Jason Blair, a Republican representing District 53. The request asked Drummond to evaluate the issue under Article X, Sections 15 and 17 of the Oklahoma Constitution.
Those provisions prohibit the state and political subdivisions from owning a “company, association, or corporation,” but Drummond said Oklahoma courts have consistently interpreted the restrictions as aimed at preventing public funds from being invested in or used to support private enterprises. A captive insurer wholly owned by the state or a political subdivision that exists only to insure that entity does not involve such public aid, he said.
“A captive insurance company wholly owned by the state or a political subdivision, and existing only to insure against that body’s risk exposure, does not implicate these concerns,” Drummond wrote.
The opinion cited Oklahoma Supreme Court decisions, including Lawrence v. Schellstede, which the attorney general said supports reading the constitutional language in a way that does not unnecessarily restrict routine risk management activities of public bodies. Drummond also cautioned that captive arrangements involving private interests could raise concerns, noting that attorneys general in other states have found constitutional violations where public entities participated in captive structures tied to private parties. The opinion warned that public entities must structure any captive “in a way that avoids participation by or entanglement with private interests.”
Oklahoma Insurance Commissioner Glen Mulready said the opinion confirms public entities can form captives and that state statutes will clarify the issue. Mulready said hard market conditions have prompted interest from public entities, particularly schools. He said the application process remains unchanged and public entities will be treated like any other applicant, with minimum capital and surplus requirements consistent with existing captive formations, though applications from public entities may be reviewed more conservatively.
Oklahoma ranked 23rd globally among captive domiciles with 64 licensed captives at year-end 2024, and noted Steve Kinion was appointed captive director at the Oklahoma Insurance Department in 2022.
If lawmakers pursue captive legislation, it would be considered alongside other insurance proposals expected in the upcoming session, including measures touching on legal reform, claims handling, data reporting and mitigation project discounts.
