January 22, 2026

Conn. Insurance Dept. answers questions on PHL Variable’s $2.2B plight

Connecticut regulators are moving toward liquidation proceedings for PHL Variable Insurance Co., as the company faces a $2.2 billion shortfall.

Connecticut insurance commissioner Andrew Mais, who led an 18-month attempt to financially salvage PHL Variable, resigned suddenly with the finish line in sight. New interim Commissioner Joshua Hershman quickly pivoted to liquidation.

The Connecticut Insurance Department agreed to answer InsuranceNewsNet’s questions regarding its oversight of PHL Variable through the years. These answers were provided in December before liquidation plans were announced.

Did CID conduct any financial examinations or audits of PHL Variable before or after its acquisition by Nassau Re?

The CID is required by law to conduct a financial examination of each Connecticut-domiciled insurer at least every five years. The most recently completed financial examination of PHL was conducted by the CID as of 12/31/17. A financial examination as of 12/31/22, was in process prior to PHL entering rehabilitation.

All domestic insurers are also required by law to submit annual audited financial statements, and annual and quarterly statutory financial statements to the CID. The CID’s financial analysis team reviews each domestic insurance company’s financial statements upon receipt.

Because PHL issued products registered with the Securities and Exchange Commission, PHL also files financial statements with the SEC.

What criteria did CID use to approve the reinsurance arrangements involving Nassau and the affiliated reinsurers?

All affiliated reinsurance transactions between PHL and other Nassau affiliates were submitted to the CID as required by CGS §38a-136(b)(1)(C) as it was in effect at the relevant time. The current requirements applicable to any such transaction are set forth in CGS §39a-136(a) and (d). Please note that CGS §38a-136 was most recently amended by Public Act 22-118, which was effective July 1, 2022.

Were any red flags raised internally regarding the solvency of PHL Variable or the adequacy of its reserves?

PHL has faced a variety of challenges, some of which were unique to PHL and some of which were industry-wide. These challenges have long been known to the market and reflected in PHL’s financial strength and credit ratings for well over a decade. One of the challenges faced by PHL is a block of universal life policies sold in the early to mid-2000s to policyholders with issue ages over 70 and high face amounts. Many of these policies were later sold by policyholders to unrelated third-party investors. These investor-owned policies are particularly problematic for PHL as they were not funded as PHL expected them to be when it originally established its pricing. In addition, PHL faced other challenges, including adverse mortality, in part due to the COVID-19 pandemic, a sustained low-interest environment, and underperforming investments.

S&P downgraded PHL’s rating from BB to CCC+ in June 2019. In September 2019, PHL’s rating was withdrawn. PHL went into run-off in 2019 and ceased writing any new business.

The Petition for Order of Rehabilitation and Appointment of State Insurance Commissioner as Rehabilitator of PHL Variable Insurance Company, Concord Re, Inc. and Palisado Re, Inc. provides additional detail regarding PHL’s financial condition and actions taken in response.

How did CID assess the capital adequacy and risk transfer in the affiliated reinsurance transactions?

The affiliate reinsurance filings submitted to the CID and the CID’s related analysis are not publicly available. The CID is required by law to consider the requirements specified in CGS §38a-136 as described above in the response to Question 2.

Were policyholders or annuity contract holders informed about PHL Variable’s financial condition during its restructuring or reinsurance deals?

The transactions were disclosed in the PHL financial statements, as required by law. Notably, these types of transactions (whether affiliated or not) do not require individual policyholder notification.

How much information about these reinsurance agreements was made public or filed with NAIC?

Any filings submitted to the CID seeking approval of affiliated reinsurance agreements are not public. However, this type of transaction must be disclosed in an insurer’s annual statements as filed with the CID and NAIC, and which are publicly available.

What steps did CID take to ensure that PHL Variable’s policyholders remained protected under Nassau’s ownership?

As PHL’s financial condition worsened, the CID increased its regulatory oversight of PHL for several years prior to placing the Companies into Supervision in March 2023. The decision to initiate rehabilitation proceedings was determined to be in the best interest of PHL’s policy and annuity holders, creditors and the public. Regulators must always strike a balance with troubled companies between early intervention and allowing companies the opportunity to pursue successful paths out of challenged situations.

Were the reinsurers established by Nassau fully licensed and capitalized under Connecticut or offshore jurisdictions?

Concord Re, Inc. and Palisado Re, Inc. are both Connecticut-domiciled captives.

Nassau Re (Cayman), Ltd. is domiciled in the Cayman Islands.

Did CID review whether these captive reinsurers had sufficient collateral to back their assumed liabilities?

Were any exceptions or waivers granted by CID to allow Nassau to use affiliated reinsurers instead of third-party entities?

No. Entering into a reinsurance transaction with an affiliate is a common practice. The transactions were submitted to and approved by the CID.

Why wasn’t PHL Variable allowed to increase COI charges?

PHL implemented COI increases in 2017 and 2021. Class action litigation was filed in response to both increases. The 2017 action was settled and the 2021 action is pending but currently stayed as provided by the Rehabilitation Order.

When PHL was transferred to Golden Gate’s balance sheet, was CID informed that no further capital would be forthcoming for the troubled insurer?

At the time of the PHL restructuring, the earlier commitment by Nassau Financial Group to maintain specified capital levels was no longer in place. However, prior to the commencement of the PHL rehabilitation proceedings, the CID renewed its earlier request that Golden Gate contribute additional capital to sustain PHL’s operations and meet claims obligations. Golden Gate advised the CID that it would not provide additional capital or cause its subsidiaries of affiliates to do so in order to improve PHL’s or its subsidiaries’ financial condition.

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