July 22, 2025

$18M policy owner denied ‘seat at the table’ in PHL Variable rehab effort

A high-dollar policyholder has no right to “full-party” status in the PHL Variable rehabilitation proceedings, a Connecticut judge ruled Friday.

SWS Holdings owns two Phoenix Generations UL Flexible Premium Adjustable Life Insurance policies worth $18 million in death benefits, the company said in its April 16 motion to intervene. SWS has paid more than $12 million in premiums to date, the company said.

“The Policies were purchased in 2006 and they are intended to fund a stock purchase agreement under which promptly following the Insured’s death SWS Holdings is obligated to repurchase its stock beneficially owned by the Insured for the benefit of the Insured’s heirs,” the motion stated.

In May 2024, Insurance Commissioner Andrew Mais introduced a moratorium on benefits payments until a Connecticut court approves a rehabilitation plan for the financially troubled PHL Variable.

Since then, policyholders filed several legal challenges seeking to weaken the moratorium and/or intervene in the rehabilitation effort.

Judge Daniel J. Klau previously granted “limited intervenor status” to settle the legal question on whether certain policyholders had “setoff rights.” But he ruled that SWS’s motion goes too far, agreeing with Mais that the rehabilitation proceeding is “not a civil action.”

Connecticut law does not authorize the court to grant intervenor status to a nonparty with an interest in a rehabilitation proceeding, Klau wrote.

“Moreover, permitting SWS Holdings to become a full party to the proceeding, with all of the rights a party to a civil action has to engage in discovery, including possibly taking the commissioner’s deposition, would wreak havoc with the statuatory scheme that the General Assembly enacted,” Klau concluded.

‘Adversely affected’

In its motion to intervene, SWS said they have been “adversely impacted” by the Mais’s decision
to cap policyholder death benefits or policy maturity benefits at $300,000.

That decision had the effect of dividing the PHL policyholders into two camps, SWS claimed: “under the cap” policyholders who will receive payment in full under their policies, and the “over the cap” policyholders, who “will receive less than what they bargained for when they purchased their PHL insurance policies.”

SWS further argued that Mais has a conflict of interest because the moratorium order does not restrict how he uses the excess premiums paid by the company. Those dollars could be used to fund general expenses associated with the rehabilitation, including the payment of benefits to “under the cap” PHL policyholders, SWS said, and even commission payments to brokers.

Meanwhile, SWS has “no assurances that [SWS] will receive more than the Moratorium cap amount,” the motion said.

But even if the court agreed with the conflict-of-interest argument, Klau noted, the law does not empower him to remove Mais as rehabilitator.

The troubled PHL and its subsidiaries, Concord Re and Palisado Re, were put in Mais’s control after a May 20, 2024 court order. PHL issued life insurance and annuity products and related supplemental contracts to policyholders nationwide. Concord and Palisado are captive insurers whose only business is the reinsurance of PHL’s liabilities.

In his May 20, 2025 status report, Mais outlined efforts to sell or reinsure PHL books of business. Thirteen companies signed non-disclosure agreements and have access to a “virtual data room” with an actuarial appraisal report, a summary of existing reinsurance arrangements, and details regarding the PHL companies’ arrangements with third-party administrative and investment providers.

Mais recently asked the court to loosen the moratorium on PHL Variable policies to allow for more flexible distributions for universal life and fixed indexed annuity owners.

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