Michael Maglaras & Company To Help Form Captive for Crumbling Foundations
April 26, 2018
After releasing a request for proposal (RFP) earlier this year, the incorporators of a new Connecticut captive insurer, Connecticut Foundation Solutions Indemnity Company, LLC (CFSIC), have chosen Connecticut-based international captive consulting firm Michael Maglaras & Company as the captive entity's superintendent, effective immediately. The superintendent will assist the incorporators and organizing committee in the formation and implementation of the captive. Michael Maglaras & Company, headed by its principal, Michael Maglaras, has more than 30 years of experience in captive insurance company implementation, underwriting, and advisory services.
CFSIC will be formed to support Connecticut residents in the state's northeast corner who have experienced problems with crumbling home foundations made from concrete containing pyrrhotite. High levels of pyrrhotite, an iron sulfide mineral, react with water and oxygen, causing the cement to swell and crack.
In most cases, insurance companies have denied the homeowners' claims, and the Federal Emergency Management Agency has also denied assistance. Furthermore, the state's attorney general's office found that Connecticut's consumer protection statutes provide for no monetary relief. In short, the only available remedy up until recently was for homeowners to bear the cost of fixing the problem themselves.
In 2017, enabling legislation created the Crumbling Foundations Assistance Fund to be funded with $100 million in state bonds over 5 years. The fund will be administered through the CFSIC, which is expected to cover foundations requiring repairs and replacement. The CFSIC will operate until June 30, 2022 or until its existence is terminated by law. As reported in the February 2018 edition of Captive Insurance Company Reports (CICR), published by IRMI, the response to this risk was as follows:
[A] collaborative effort involving Connecticut federal, state, and local governmental leaders.... In the Connecticut legislature, Representative Jeff Currey (D-East Hartford) was a key driving force. According to Mr. Currey, "Establishing an independent, nonprofit captive insurance company to distribute remediation funds in the form of grants is the best option because of the high levels of accountability and transparency it will ensure. The captive will be subject to the same regulations and oversight as all other insurance companies through the Connecticut Insurance Department."
"We are pleased to have been selected by the incorporators of Connecticut Foundation Solutions Indemnity Company to launch this new captive insurance company and to assist its board of directors in bringing needed relief to hard-hit homeowners in the northeast corner of Connecticut," said Mr. Maglaras. "We have much work ahead of us...and it's hard work...but I would sum it up in one phrase: 'Help is on the way.'"
The superintendent will work with the board of directors to achieve the following.
- Create and file a business plan for the formation of CFSIC with the Connecticut Insurance Department within 45 days of engagement;
- Identify all needed service providers, supervise an RFP for these providers, and assist the board of CFSIC in the service provider process;
- Create a budget for the first 12 months of operation, inclusive of all expense and supporting the prudent management of CFSIC's resources;
- Oversee the implementation of CFSIC and have the insurance company operational and able to begin the adjustment process within 90 days of the contract.
As CFSIC has no employees, the superintendent is responsible for contracting any required services. The initial term of the superintendent contract is one year.
April 26, 2018