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EXHIBIT 4.32
 Execution Copy
 INSURANCE AGREEMENT
 FGIC
 WHEREAS Indenture Issuer Trustee Bonds
 WHEREAS Loan Agreement
 WHEREAS Guaranty Agreement
 WHEREAS Policy
 WHEREAS
 NOW, THEREFORE
 ARTICLE I
DEFINITIONS
 SECTION 1.01. Definitions.
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EXHIBIT 4.32
 ARTICLE II
PREMIUM AND REIMBURSEMENT OBLIGATIONS
OF THE COMPANY
 SECTION 2.01. Premium.
 SECTION 2.02. Reimbursement Obligation.
 SECTION 2.03. Unconditional Obligation.
     ARTICLE III
REPRESENTATIONS AND WARRANTIES
 SECTION 3.01 . Representations and Warranties of Crystal Water and the Holding Company.
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EXHIBIT 4.32
 Company
Documents
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EXHIBIT 4.32
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EXHIBIT 4.32
  ARTICLE IV
COVENANTS
 SECTION 4.01. Consolidation, Merger and Transfer of Mortgaged Property.
 Restructuring, Merger, Consolidation, Reorganization.
 Sale of Assets of Crystal Water.
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EXHIBIT 4.32
  Sale of Assets of Connecticut Water Company.
 Holding Company Restructuring, Merger, Consolidation, Reorganization or Sale of Assets.
   SECTION 4.02. Restrictions on Liens and Sale and Leaseback Transactions.
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EXHIBIT 4.32
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EXHIBIT 4.32
      SECTION 4.03. Liquidity Facility.
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EXHIBIT 4.32
  SECTION 4.04. Covenant Merger.
 ARTICLE V
EVENTS OF DEFAULT; REMEDIES
 SECTION 5.01. Events of Default.
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EXHIBIT 4.32
  SECTION 5.02. Remedies.
 ARTICLE VI
SETTLEMENT
  ARTICLE VII
MISCELLANEOUS
 SECTION 7.01. Reimbursement of Costs and Expenses; Payments Generally.
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EXHIBIT 4.32
   SECTION 7.02. Indemnification; Limitation of Liability.
 Liabilities
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EXHIBIT 4.32
     SECTION 7.03. Exercise of Rights.
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EXHIBIT 4.32
 SECTION 7.04. Amendment and Waiver.
 SECTION 7.05. Payments.
 SECTION 7.06. Successors and Assigns; Descriptive Headings.
   SECTION 7.07. Waiver.
 SECTION 7.08. Entire Agreement.
 SECTION 7.09. Notices, Requests, Demands.
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EXHIBIT 4.32
 
  
  
 SECTION 7.10. Survival of Representations and Warranties.
 SECTION 7.11. Governing Law.
 SECTION 7.12. Counterparts.
 SECTION 7.13. Severability.
 SECTION 7.14. Parties Interested Herein
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EXHIBIT 4.32
 SECTION 7.15. Term
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EXHIBIT 4.32
  THE CRYSTAL WATER COMPANY OF DANIELSONBy:
    
    /s/ David C. BenoitDavid C. BenoitVice President  Finance and Chief Financial
OfficerCONNECTICUT WATER SERVICE, INC.By:
    
    /s/ David C. BenoitDaniel C. BenoitVice President  Finance and Chief Financial
OfficerFINANCIAL GUARANTY INSURANCE COMPANYBy:
    
    /s/ Paul R. Morrison

Paul R. MorrisonManaging Director, International and Global
Utilities
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EXHIBIT 4.32
 ANNEX A
DEFINITIONS
  Agreement
  Attributable Debt
 Bonds
 Commitment
 Company Documents
 Debt
 Dollar $
 Effective Interest Rate
 Event of Default
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EXHIBIT 4.32
 Holder Holders
 Indenture
 Internal Revenue Code
 Lien
 Loan Agreement
 Net Tangible Assets less
 Policy Claim
 Policy Payment
 Premium
 Principal Property
 Significant Subsidiary
 A-2




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EXHIBIT 4.32
 ANNEX B
 LIQUIDITY FACILITY REQUIREMENTS
 1.
    
    Liquidity Provider Credit Ratings:The provider (the Provider) of a liquidity facility
(the Facility) to be used to pay the purchase price of tendered variable rate bonds (the
Bonds) shall be rated by both Moodys Investors Service (Moodys) and Standard & Poors
Ratings Services (S&P), and shall be of sufficient strength to cause the short-term ratings
for the Bond issue to be A-1+ by S&P and VMIG-1 by Moodys. Financial Guaranty will not
deliver its bond insurance policy (the Policy) until such rating or ratings have been
released. Any Provider whose long-term rating drops below A- (S&P) or A3 (Moodys) shall be
replaced at the request of Financial Guaranty.
 2.
    
    Initial Term of Facility:Minimum initial term of 364 days is acceptable so long as the
notice of non-renewal (Section 9 hereof) provides adequate time for the Issuer to find a
substitute facility and the authorizing document mechanics in the event of non-renewal provide
for the Bonds to be tendered and the Facility to be drawn upon before expiration of the
Facility.
 3.
    
    Renewals and Amendments:Any renewal on terms not identical to the terms of the initial (or
then renewing) Facility, or with a different Provider, shall be subject to the prior written
consent of Financial Guaranty. Financial Guaranty shall be provided with notice (and a copy)
of all Facility renewals, amendments and supplements.
 4.
    
    (a) Immediate Termination Events.Upon the occurrence of onlythe following events, the
Provider may terminate the Facility prior to the stated expiration date thereof without
offering Bondholders one last opportunity to tender the Bonds to the Provider for purchase:
 (i)
    
    Policy Default. Failure by Financial Guaranty to pay
principal and interest when, as and in the amounts required under the Policy,
including interest at the bank rate due the Provider on disbursements under
the Facility if such amount is included as interest on the Bonds under the
terms of the Bonds;(ii)
    
    Payment Default Under Other Insurance. Any default by
Financial Guaranty in making payment when, as and in the amounts required to be
made pursuant to the express terms and provisions of any other municipal bond
insurance policy or surety bond issued by Financial Guaranty;(iii)
    
    Nullity of Policy. The Policy for any reason ceases
to be in full force and effect or is declared by a court of competent
jurisdiction to be null and void, or Financial Guaranty denies that it has any
further liability under the terms thereof; or(iv)
    
    Insolvency Proceeding Against Financial Guaranty. A
proceeding has been instituted in a court having jurisdiction in the premises
seeking an
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EXHIBIT 4.32
  (b)
    
    Termination Event Requiring One Last Put Opportunity.Upon the occurrence of
onlythe following events, the Provider may terminate the Facility prior to the stated
expiration date thereof but must provide Bondholders with one last opportunity to
tender their Bonds to the Provider for purchase prior to termination:
 (i)
    
    The financial strength rating assigned to Financial Guaranty or
the rating assigned to securities insured by Financial Guaranty, as applicable,
is withdrawn, suspended or reduced to A, A2 or A, or below by any two of S&P,
Moodys or Fitch, respectively.(ii)
    
    Failure of the Issuer to pay the Provider commitment fees for the Facility.
 (c)
    
    No Other Termination Events.The only events permitting termination of the
Facility by the Provider prior to its stated expiration date are as specified in 4(a)
and 4(b) above. In particular, neither failure by the issuer to comply with any
covenants made by it in the Facility nor breach by the issuer of any representation or
warranty made by it in the Facility nor continuation of such failure or breach
following receipt by the issuer of notice thereof is a permissible event of
termination. The sole remedy allowed to the Provider upon such an event of default
shall be the ability to sue for specific performance.(d)
    
    Events Permitting Acceleration.Upon the occurrence of an event described in
4(a), the Provider may tender its Bonds to the issuer for immediate repurchase, and no
limitations shall be imposed on the exercise by the Provider of any remedies available
to it against the issuer (e.g.,causing the issuer to accelerate its loan to the
ultimate borrower of Bond proceeds) should the issuer default on any such repurchase
obligation to the Provider.
 5.
    
    Conditions to Effectiveness of Facility:
 (a)
    
    As a condition to closing, Financial Guaranty may be required to provide its
customary enforceability and disclosure opinion with respect to the Policy.(b)
    
    As a condition to the issuance of the Policy, an opinion of counsel to the
Provider (including a separate opinion of foreign counsel in the case of a U.S. branch
of a foreign bank) regarding corporate matters, validity, enforceability and such other
matters as Financial Guaranty shall require, shall be addressed to (or shall be the
subject of a reliance letter addressed to) Financial Guaranty.
 
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EXHIBIT 4.32
 6.
    
    Form of Liquidity Facility:Either a letter of credit or a standby bond purchase
agreement shall be acceptable.
 7.
    
    Parity Payments:(Applicable for revenue bond issues)The Facility shall provide that only
the following amounts are payable on a parity with principal of and interest on the Bonds: (i)
the Providers periodic commitment fee and (ii) interest on the Bonds held by the Provider
calculated at the provider rate. All other amounts (e.g.,increased obligation of the
debtor enforceable in accordance with its terms costs, uninsured claw-back amount, penalty
interest charges and indemnification amounts) shall be payable on a subordinated basis to
payment of principal and interest on the Bonds, replenishment of any debt service reserve fund
and payment of the fees of the trustee or paying agent for the Bonds (herein, the Trustee),
and both the Facility and the authorizing document for the Bonds shall specifically so
provide.
 8.
    
    Increased Costs:Any increased costs payable by the issuer pursuant to the Facility shall
be subordinated to the payment of principal and interest on the Bonds, replenishment of any
debt service reserve fund and payment of the fees of the Trustee, and the Facility shall
expressly so provide. The Facility shall limit increased costs to increases in costs to the
Provider or any participant of its obligations under the Facility as the result of the
imposition, increase or applicability of any reserve, special deposit, capital adequacy or
similar requirement against the obligations of the Provider or any participant under the
Facility (other than as a result of the acts, omissions or financial condition of the Provider
or such participant) due to any change in any law or regulation or in the interpretation
thereof by any court or administrative or governmental authority charged with the
administration thereof.
 9.
    
    Notice of Non-Renewal:The Provider shall be required to give not less than 30 days notice
to the Trustee and Financial Guaranty before the Trustee under the authorizing document is
required to give Bondholders notification to tender Bonds as a result of a non-renewal
(Non-Renewal Mandatory Tender). (If the Trustee is required to send out a Mandatory Tender
Notice 30 days prior to the Facility termination, the Provider will be required to give the
Trustee notice of non-renewal 60 days prior to the expiration date of the Facility of its
intention not to renew or extend the Facility.) Early termination pursuant to paragraph 4(b)
above requires the same timing notification as described above. Early termination pursuant to
paragraph 4(a) above requires no prior notice.
 10.
    
    Certain Mandatory Conversions to Fixed Rate:The Trustee shall commence the process required
by the authorizing document to effect a mandatory conversion of the interest rate on the Bonds
to a fixed rate (sufficient to accomplish the complete remarketing at par of all Bonds then
held by the Provider) on or as soon as practicable after the termination date of the Facility,
in the case of a termination pursuant to paragraph 4(a) or 4(b) and a Non-Renewal Mandatory
Tender:
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EXHIBIT 4.32
 11.
    
    Holding Periods:For amortization periods of less than 5 years, no amortization shall be
permitted prior to the first anniversary of the date the tendered Bonds are purchased by the
Provider. For amortization periods of 5 years or more, no amortization shall be permitted
prior to 6 months from the date the tendered Bonds are purchased by the Provider. Whether
during the term of the Facility or subsequent to the termination thereof, the Provider shall
not be permitted to tender unremarketed Bonds to the issuer and shall be required to hold such
Bonds for the periods and in accordance with the conditions set forth above (except that no
holding period is required in the event of a termination of the Facility pursuant to 4(a)
hereof). Financial Guaranty shall pay only principal and interest on the Bonds as scheduled,
in accordance with the terms of the Policy, unless Financial Guaranty has provided, at the
request of the Provider, an endorsement to its Policy to cover a special mandatory redemption
under the authorizing document.
 12.
    
    Maximum Rates:The maximum rate payable for any interest payment period on the Bonds,
whether or not held by or pledged to the Provider at such time, shall be the lesser of 10%
per annum and the maximum rate permitted by applicable law (the Cap Rate).
 B-4