(a) Municipalities may provide workers' compensation coverage either through private carriers or through one or more self-funding groups.

(b) Self-funding groups established for this purpose shall meet the following requirements:

(1) Any self-funding group established to provide such coverage for municipalities only shall offer coverage to any municipality in the state that applies for coverage;

(2) Any such group established to provide coverage for both municipalities and counties shall offer coverage to any municipality or county in the state desiring to participate therein;

(3) Any group established to provide workers' compensation coverage to municipalities or to counties and municipalities shall offer such coverage at rates as established and filed with the Workers' Compensation Commission by the organization establishing the self-funding group. Rates for municipalities participating in any such group shall be revised annually based on the cost experience of the particular municipality, or group of municipalities, or group of municipalities and counties; and

(4) (A) (i) Any self-funding group of participating municipalities or counties which is governed by a board of trustees of elected municipal or county officials shall be subject to the regulations of the Workers' Compensation Commission applicable to self-insured groups or providers. However, cities and counties shall not be required to enter into an indemnity agreement binding them jointly and severally.

(ii) Each board governing a self-funding group shall be permitted to declare dividends or give credits against renewal premiums based on annual loss experience.

(iii) All self-funded groups shall obtain excess reinsurance from an admitted or approved insurance company doing business in Arkansas.

(B) However, in lieu of the reinsurance requirements in subdivision (b)(4)(A) of this section, any self-funded group under this section with one million five hundred thousand dollars ($1,500,000) or more in annually collected premiums may provide excess reserves of twenty percent (20%) of annual premiums by any one (1) of the following ways:

(i) Cash or certificates of deposit in Arkansas banks;

(ii) Letters of credit from an Arkansas bank; or

(iii) Purchase of reinsurance from the National League of Cities' Reinsurance Company or County Reinsurance, Limited, a national reinsurance facility for county governments.