Rehabilitator: PHL Variable liquidation payouts could exceed guaranty caps
A new status update from the Connecticut insurance commissioner offers hope that PHL Variable Insurance Co. policyholders will receive benefits in excess of standard guaranty association limits.
Interim Commissioner Joshua Hershman is serving as the court-appointed rehabilitator for the financially troubled PHL Variable. He is pursuing a liquidation plan and provided the Connecticut Superior Court with a status update on Wednesday.
Regulators continue to work with the National Organization of Life and Health Insurance Guaranty Associations on liquidation planning and discussions with prospective buyers that could provide policyholders with additional benefits beyond guaranty association coverage, Hershman wrote.
“Whether such a transaction is possible and the amount of such additional coverage will depend on the outcome of negotiations with the prospective buyers of PHL that may provide such coverage or an alternative additional benefit,” he added.
Policyholders are set to receive between $250,000 to $500,000 in guaranty coverage, depending on which state they live in. Regulators have said that about 70% of PHL Variable policyholders will be fully covered by state guaranty associations.
Legal claims proceeding
The new report sheds additional details on potential legal claims against entities tied to PHL’s former parent company, Nassau Financial Group, and private equity firm Golden Gate Capital. The companies face claims involving alleged breaches of fiduciary duty, breach of contract and avoidable transfers, the rehabilitator said.
Hershman has entered into “a tolling agreement to preserve those claims during the ongoing discovery and investigation process,” the report states. “The end result of these efforts will either be a settlement, which will require Court approval following notice to policyholders and creditors, or litigation to pursue the claims.”
The Nassau Group and Golden Gate dispute the validity of any claims.
Hershman reported “significant improvement” to PHL Variable companies’ liquidity position, as work continues to restructure the companies’ investment portfolio. Some higher-risk assets were sold during 2025, increasing the share of invested assets held in higher-quality, short-duration investments from 69% at the end of 2024 to 84% by year-end 2025.
Cash, cash equivalents and short-term investments rose from $170.4 million at the end of 2024 to $594.1 million as of March 31, 2026, according to the report. Officials attributed the increase to moratorium restrictions on claims payments, ongoing premium inflows, investment income and reinsurer-related segregated account deposits.
Connecticut regulators placed PHL Variable into rehabilitation in May 2024 due to hazardous financial conditions, attaching a moratorium on benefits and premiums. In December, a judge approved changes to the moratorium that could reduce universal life death benefits owed by up to $4.1 billion.
Approximately 10,150 election packages were sent to eligible fixed indexed annuity holders and about 3,500 were mailed to eligible universal life policyholders, Hershman said. The rehabilitator said results from the benefits changes are expected to be reported later this year.
Meanwhile, a rehabilitation website and online outreach efforts have drawn “significant policyholder engagement,” Hershman noted. About 650 stakeholders attended an April online information forum, and more than 250 questions were submitted in advance.
Deep underwater
Financially, the companies remain deeply underwater, the report concluded. Combined audited financial statements for PHL and affiliated companies showed negative capital and surplus of approximately $2.3 billion as of Dec. 31, 2025, largely unchanged from the prior quarter.
Hardship relief payments now total about $10.8 million, the report said. Of roughly 574 hardship applications submitted, 378 have been approved.
Litigation tied to the rehabilitation continues on multiple fronts. The court recently denied motions from several life settlement investors seeking relief related to premium obligations on large investor-owned policies.
Two lawsuits involving PHL remain active, including a professional negligence case against a law firm tied to failed Oyster Bay, N.Y. loan transactions. That trial is slated to begin next month.
The second lawsuit was filed by Sirius Federal against the United States Defense Information Systems Agency for breach of contract and breach of the duty of good faith and fair dealing in connection with a contract to supply certain software licenses.
Sirius used financing from PHL and other entities for the acquisition of the software at issue. The case remains in discovery and a trial date has not yet been set, Hershman reported.
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