(a) The Department of Administrative Services may formulate and initiate a plan of self-insurance for the state's properties. The department shall cause:

(1) A complete appraisal to be made of all the state's insurable property as to value;

(2) A complete classification to be made of all the state's insurable property by type of risk; and

(3) A determination and recommendation to be made of the amount and extent of self-insurance which the state can assume, the necessary reserves needed, the minimum claim to be paid on each risk, the type of additional or excess insurance coverage that may be required, the premiums to be charged, and any deductibles to be paid by state agencies and authorities.

(b) The department is further authorized to establish incentive programs, including differential premium rates based on participation in loss control programs established by the department, increased or decreased deductibles based on participation in loss control programs established by the department, and the imposition of fines and penalties. If any premiums, deductibles, fines, or penalties are unpaid, the department is authorized to deduct any unpaid amounts from the nonpaying agency's or authority's continuation budget subject to the approval of the Office of Planning and Budget and deposit those funds into the state insurance and hazard reserve fund provided for in this chapter.

(c) Upon the formulation of a plan of self-insurance based on the foregoing determinations made and submitted by the Department of Administrative Services, the Governor, by executive order, may establish and effectuate a plan of self-insurance; and the General Assembly from time to time shall provide and maintain by appropriation an insurance reserve fund.