PHL VARIABLE REHABILITATION

Insurance Commissioner of the State of Connecticut v PHL Variable Insurance Company et al.

Connecticut Superior Court, Waterbury Judicial District

Case No. UWY-CV24-6085274-S

Summary of Proceedings

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”).

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. The temporary moratorium was put into place on May 20, 2024. 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.

Modification of Moratorium Order

On July 21, 2025, the Rehabilitator filed a Motion to Modify the Moratorium Order, with the intention of providing some relief for Universal Life (UL) policyholders and Fixed Indexed Annuity policyholders.  A hearing was held on October 21, 2015, where limited intervenors were permitted to present argument.

If the Rehabilitator’s motion is approved, the UL policyholders will be permitted to (i) reduce the face amount of death benefits under the policy to any level permitted by the terms of the policy and receive a commensurate reduction to the cost of insurance or premium payments as provided in the policy, or (ii) fix a claim in the rehabilitation proceeding and stop the payment of ongoing cost of insurance (COI) charges or premium. The basis for such a claim would be the policy’s cash surrender value (CSV) as of the date of election plus an enhancement equal to the amount the policyholder has paid in cost of insurance during a portion of the rehabilitation proceeding period, resulting in an adjusted surrender value (ASV). The election of this option allows the policyholder to fix a claim for the ASV with no ongoing obligation for cost of insurance charges or premium payments. The claim would be allowed as a policyholder priority claim in a rehabilitation or liquidation of PHL.

Fixed Indexed Annuity (FIA) policyholders would be permitted one of two options. The first would be to take a one-time withdrawal up to the “Free Withdrawal Amount” provided for in the contract. Typically, this is 10% of the contract’s account value. This withdrawal would be without surrender charge or market value adjustment. The amount of any distribution would be reduced by the amount of any prior hardship payments received by the FIA holder. The second option would be to permit an FIA holder to activate the contract’s income rider (to the extent the policy has one). These payments would also be limited by the $250,000 cap in the Moratorium Order. Once the contract’s income rider is activated, it cannot thereafter be deactivated.

On December 2, 2025, the Court issued a Memorandum of Decision Re: Motion to Modify Moratorium Order (#158), determining that,

[T]he Rehabilitator’s proposed modifications to the Moratorium Order are within the scope of his authority under the Act and are rational. Accordingly, the motion to modify, as amended, is GRANTED. All objections to the motion, as amended, are OVERRULED.

An Order by the Court followed on December 24, 2025. The Rehabilitator has posted an announcement on the CT Insurance Department’s website that election packages will be sent to eligible policyholders in January 2026. Those policyholders will have 45 days from the date of mailing to make their elections.

Rehabilitation Now Off the Table

On December 31, 2025, the Rehabilitator did an about-face an filed a “report” stating that “it has become clear that all of PHL’s blocks of business are materially impaired” and rehabilitation “is not feasible.” The New Year’s eve report indicates that state guaranty associations will be triggered, after an order of liquidation has been entered.

PHL’s Troubled History – from Successful Phoenix Subsidiary to Rehabilitation

While many people may not be familiar with the name PHL Variable Insurance Company, many will recall The Phoenix Companies (“Phoenix”). 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 November 2019, PHL entered into a reinsurance contract with Concord Re, Inc., its wholly owned subsidiary. According to the petition for rehabilitation, 100% of PHL’s liabilities not otherwise reinsured are reinsured by Concord. PHL ceased issuing new policies at year-end 2019. Other complex reinsurance transactions were entered into with affiliated reinsurers from 2019 – 2021.

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.

The Rehabilitator predicts that PHL’s aggregate assets will be exhausted by 2030, with $1.46 billion of policyholder liabilities unpaid.  At the time it was put into rehabilitation in May 2024, PHL had a negative $900 million in capital and surplus. Less than six (6) months later, that deficiency had grown to negative $2.1 billion. According to the Rehabilitator this was the result of reserve cash flow testing and the discontinuation of certain permitted practices.

Rehabilitation Plans – 1st, 2nd, and 3rd Status Reports

According to the Rehabilitator’s First Accounting and Status Report issued on November 20, 2024, he expected to present the “key terms” of a plan of rehabilitation by mid-2025. That did not happen. The Rehabilitator filed his Second Accounting and Status Report on May 20, 2025, indicating that he planned to propose a modification to the Moratorium Order on or around July 1, 2025, providing some options for Universal Life (“UL”) policyholders and Fixed Indexed Annuity holders. The Third Accounting and Status Report was filed on November 20, 2025. It showed that 5,530 PHL polices lapsed since the Rehabilitation, and the face amount of those lapsed policies was $5,547,166,167. Five companies had submitted proposals to purchase some or all of PHL Variable. PHL in Rehabilitation continues to pay commissions to agents.

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