PHL Variable – Connecticut Rehabilitation
On May 17, 2024, the Honorable Andrew N. Mais, the Insurance Commissioner of the State of Connecticut filed a petition seeking an order of rehabilitation of PHL Variable Insurance Company (“PHL”), Concord Re, Inc., and Palisado Re, Inc. (the “Companies”) pursuant to the provisions of the Insurers Rehabilitation and Liquidation Act, Conn. Gen. Stat. §§ 38a-903 to 38a-961 (the “Act”).
Many of you will remember PHL Variable as a subsidiary of The Phoenix Companies, a company that issued many universal life insurance policies destined for sale in the secondary market. In June 2016, the Nassau Reinsurance Group Holdings L.P. (“Nassau”), controlled by Golden Gate Capital, acquired The Phoenix Companies (of which PHL was a subsidiary) for $37.50 per share in cash. Nassau Re took Phoenix private, and later retired the Phoenix brand.
In 2021, Nassau received permission from the Connecticut Insurance Department (“CID”) to “deconsolidate” from Nassau, and PHL and its subsidiaries were transferred to GG Holding Company. PHL’s financial condition continued to deteriorate. On March 31, 2023, the CID placed PHL, Concord, and Palisado under administrative supervision “to help safeguard [their] financial security.” Now, GG Holding Company has advised the Connecticut insurance regulators that it will not provide any additional capital to PHL.
On May 20, 2024, the court granted the petition and entered an Order of Rehabilitation and Appointment of State Insurance Commissioner as Rehabilitator appointing the Commissioner as rehabilitator (the “Rehabilitator”) and directed the Rehabilitator to determine if “reorganization, consolidation, conversion, reinsurance, merger, policy restructuring or other transformation of the Companies is appropriate” and if so, to prepare a rehabilitation plan, and present such plan to the Court.
On May 17, 2024, the Commissioner petitioned the Court for an order imposing a temporary moratorium, authorizing the Rehabilitator to make limited payments to policyholders between May 20, 2024 and the date of confirmation of a rehabilitation plan. On June 25, 2024 the Court issued a Moratorium Order limiting death benefit payments and policy withdrawals for PHL policy holders, setting a cap of $300,000 (the “Moratorium Cap”). The Moratorium Cap is per person, not per policy. This means that if a policyholder owns more than one policy covering any one individual the Rehabilitator will determine the allocation of benefits to be paid under each policy. The Rehabilitator is authorized to make payments in excess of the Moratorium Cap only if a policyholder demonstrates a hardship.
The Moratorium Order requires all policyholders to make the minimum periodic premium payments as provided by the terms of their policy. This means that for policyholders with large policies they must either continue to make premium payments that may very well be in excess of available benefits or stop paying premiums and allow their policies to lapse.
