PHL VARIABLE REHABILITATION
Insurance Commissioner of the State of Connecticut v PHL Variable Insurance Company et al.
Connecticut Superior Court, Hartford Judicial District
Case No. HHD-CV24-6185151-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. 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.
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 the Companies 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.
Rehabilitation Plans
According to the Rehabilitator’s First Accounting and Status Report issued on November 20, 2024, he expects to present “the key terms” of a plan of rehabilitation by mid-2025.
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