‘Inappropriate’: CT regulator slams PHL investors for intervention bid

“There is no emergency,” Connecticut interim Insurance Commissioner Joshua Hershman wrote this week of the liquidation proceedings involving PHL Variable Insurance Co.

There is “no basis” for large policyholders to intervene in the process, and Judge Daniel J. Klau should deny such requests, Hershman added in a memorandum filed Tuesday.

SWS Holdings and BroadRiver Asset Management share the same frustrations: When former insurance commissioner Andrew Mais took over the financially troubled PHL in May 2024, he sought an accompanying moratorium that capped PHL benefits at $300,000. Large policyholders say the moratorium discriminates against them while not impacting smaller policyholders.

Mais retired on Nov. 28 and was succeeded by Hershman, who pivoted to liquidation in a Dec. 31 status update. That prompted renewed anger from SWS and BroadRiver, who filed emergency motions to intervene in the liquidation process.

The motions sought a total or partial premium holiday for their universal life policies, arguing they were misled into continuing payments under the assumption that a rehabilitation plan would sustain coverage indefinitely. The filing from Hershamn this week disputes those claims, saying the rehabilitator never promised ongoing coverage and has provided options to preserve policyholder claims during the receivership.

“The Movants’ narrative is false,” the filing reads, noting that the rehabilitator has been transparent that any rehabilitation plan would depend on a successful marketing process and would only proceed if it provided policyholders with greater coverage than a standard liquidation.

Efforts continue to pursue a transaction that would provide over-the-cap policyholders — those with benefits exceeding guaranty association limits — more coverage than they would receive in a standard liquidation, Hershman wrote.

The court previously denied a similar motion to intervene and approved modifications to a moratorium that allow policyholders to assert claims for premiums paid if they surrender their policies. The rehabilitator’s filing emphasized that the premium holiday sought by BroadRiver and SWS would be inequitable to other policyholders, particularly the majority with positive cash surrender values who have already prepaid premiums.

“The Moratorium Modifications approved by the court are the best and fairest path forward at the present time,” the filing states, adding that policyholders still have options to terminate policies and recover premiums paid under the approved plan.

Multi-million-dollar policies

SWS Holdings owns two Phoenix Generations universal life policies worth $18 million in death benefits, policies intended to fund an eventual stock purchase agreement. The company has paid more than $12 million in premiums to date, court documents say.

The BroadRiver policyholders have paid $57.1 million in premium payments, $19.7 million in the 19 months since Connecticut regulators began their rehabilitation of PHL Variable, their memo reads.

From the end of 2023 to September 2025, the amount of cash and short-term investments held by the PHL companies increased from $103 million to $437.5 million. Regulators fattened PHL’s coffers through the large premiums investors paid, the BroadRiver motion claims.

But Hershman’s memo says that the allegation is “false.”

The estate’s increase in cash during that period is primarily the result of three items having nothing to do with premium payments, Hershman said: A reimbursement of $100 million from the separate account to the general account for benefits the general account paid (post-rehabilitation) on behalf of the separate account; about $66 million in funds received from reinsurers; and about $81 million received from the sale of investments.

“Even if there were a legal basis for the Intervention Motion, the ultimate relief requested by Movants should be denied, because the premium holiday they seek is inequitable to other policyholders,” Hershman concluded. “It would have been inappropriate in a rehabilitation plan, it will be inappropriate in a liquidation plan, and it is inappropriate as part of this ongoing receivership case.”

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