The state-created captive insurer handling Connecticut homeowners’ claims for crumbling foundations is in line for another $100 million in bond funding in the biennial budget now awaiting Gov. Ned Lamont’s approval.
Lawmakers are promising $25 million in each of the upcoming fiscal years in what should be the last appropriations needed, according to officials at the Connecticut Foundation Solutions Indemnity Co. (CFSIC).
The insurer’s superintendent, Michael Maglaras, has said he does not intend to ask for any more funding for CFSIC beyond the fiscal year ending June 30, 2030. By then, the “vast majority of this crisis will be behind us, and that it will be time to wind down CFSIC’s operations by the end of 2031,” he wrote In a February report.
Maglaras estimates that by June 30, 2030, there could about 725 new claimants that will require a minimum of $100 million in funding. That would bring the total number of CFSIC claimants since it began underwriting in 2019 to between 3,200 and 3,700.
“CFSIC’s position is that we must manage the company with an eye to ending state governmental support and putting the crisis to bed as quickly as possible,” Maglaras stated in the report.
Steve Werbner, president, CFSIC, has indicated the board supports that timeline.
CFSIC was formed to assist homeowners affected by crumbling foundations due to the presence in their concrete foundations of pyrrhotite, a mineral that causes concrete to slowly deteriorate as it is exposed to oxygen and water. State officials discovered that concrete produced from a quarry in Willington contained the pyrrhotite that was causing the foundations to slowly deteriorate. Early on, officials had estimated there could be as many as 35,000 homes in the state built with the suspect material from 1983 to 2015. However, CFSIC data suggests there may be between 3,500 and 4,500 homes affected statewide.
The state got involved because most home insurers were denying homeowners’ claims, relying on standard policy language. In November 2019, the Connecticut Supreme Court backed the insurers, ruling that private insurers were not liable for crumbling foundations caused by defective concrete unless the home is on the verge of collapse.
CFSIC received startup funding of $850,000 in 2018 and began underwriting in January 2019. In 2022, the state pledged $100 million.
In addition, CFSIC receives funds from a Healthy Homes $12 surcharge collected by insurers on each homeowners policy. It received about $20 million from the surcharge through 2024 and projects it could see another $77 million by 2030.
In 2019, three insurers — The Hartford ($3.5 million), Liberty Mutual ($7 million) and Travelers ($5 million) — also contributed to help policyholders with the costs of replacing their foundations.
The insurer pays for rebuilding of foundations. It has received 2,392 claims for assistance since it launched in 2018. It has paid out $165.4 million in claims and has another $77.8 million in reserve for claims.
CFSIC President Werbner thanked lawmakers for including the additional $100 million in the budget proposal and promised that the funds “are going to put this money to good use…remediating foundations, restoring home equity to needy families, and restoring the property tax basis of the distressed towns in the affected area.”
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