Crumbling Foundations Captive Prepares for Upcoming Bond Allotment

Land problems cause a foundation to partially separate from a home and create a crack from base to roof and a smaller crack

September 17, 2019 |

Land problems cause a foundation to partially separate from a home and create a crack from base to roof and a smaller crack

The Connecticut Bond Commission is set to approve this year's annual $20 million bond allotment that helps fund the Connecticut Foundation Solutions Indemnity Company, Inc. (CFSIC), the captive insurance company charged with providing financial assistance to homeowners affected by the crumbling foundations natural disaster. The current allotment will allow the captive to resume its previously suspended operations, albeit on a limited basis, according to the CFSIC website.

On September 6, CFSIC announced it had "temporarily" suspended new claim applications due to a "quick leap" in identified claimants in the form of condominium owners, which resulted in inadequate funding being in place. The CFSIC was originally scheduled to receive approximately $125.5 million in cash between the time of the announcement and the captive's June 30, 2022 sunset date under the enabling legislation. 

However, the CFSIC website said this amount was not enough to cover new estimated claims payouts, plus administrative costs, plus the minimum capital the captive needs to have on hand—at all times—in order to keep its license as an insurance company. As a result, without a license, CFSIC temporarily ceased its operations on September 6.

With the current $20 million allotment slated for approval, the CFSIC may resume activities shortly; however, it will do so on a limited basis. 

Following this year's $20 million allotment, the captive does not expect to receive its next bond allotment until after July 1, 2020, which means participation in the program would need to be rationed over the next 9 months to avoid a second suspension of the captive on December 1, according to the CFSIC website.

Specifically, of the 100 homeowners currently awaiting funds from the captive that will allow them to begin scheduling contractors to work on their homes, rationing would only allow participation to move forward for the next 61 homeowners waiting in line.

Therefore, CFSIC has requested the current $20 million allotment be increased to a $60 million allotment (in other words, a prefunding of all remaining bond allotments due CFSIC to allow the captive to proceed without being forced to ration participation among homeowners who await funding).

The CFSIC website said if the captive got $60 million this month, there would be no reason to suspend participation between now and CFSIC's 2022 sunset date.

In a statement on its website, the CFSIC said, "All of us who work on the CFSIC project understand clearly that our robust claim application process has greatly accelerated the identification of claimants in need. We make no excuses for our success. We all signed on to a project with the understanding that CFSIC would only get annual bond commission allotments of $20 million, regardless of how fast we were moving. No one within the CFSIC system is pretending otherwise."

September 17, 2019