Did You Know / March 2025

PHL Variable Life Insurance Company’s Financial Meltdown: What This Means for Life Insurance Policyholders

The Connecticut Insurance Department entered rehabilitation proceedings regarding PHL Variable Insurance Company (“PHL”) on May 20, 2024.  On June 25, 2024, the Connecticut Superior Court approved terms of a moratorium which limits payments on many policies while a rehabilitation plan is developed sometime in mid-2025.  

Please Note: Insurer names can be similar and may change over time due to acquisitions, mergers, and rebranding.  This moratorium applies only to PHL Variable Life Insurance Company and its subsidiaries, Concord Re, Inc. and Palisado Re, Inc.  

The moratorium makes significant distinctions between the treatment of Separate Account policies (essentially variable life insurance) and General Account policies (all the non-variable policies).  Separate Account (“SA”) policyholders are afforded greater latitude and potentially higher benefit amounts during this moratorium than General Account (“GA”) policyholders as noted in the table below.

Limits are per insured…not per policy.  During the moratorium, it is unlikely that large policyholders will be able to collect their full benefits.  Imagine a policyholder getting $300,000 to help pay for estate taxes instead of the $3,000,000 face amount.  Will insureds need to rethink allocations to revocable or irrevocable trusts to adjust for the lower death benefit to be paid?  Will they need to alter anticipated charitable donations at death because of the benefit shortfall?  This can be especially challenging for insureds who are at advanced ages or have experienced declines in health that prevent new insurability with a different insurer.  

KEY TAKEAWAYS

  1. Policyholders who may experience reduced benefit levels should consider how the reduction impacts their wealth transfer and protection plans.

  2. Separate Account policyholders may want to explore options they currently have while under the more advantaged moratorium rules as the future rehabilitation plan could differ.  

  3. Financial strength matters and can change over time.  Prudent policyholders will monitor the financial strength of their insurers.  If appropriate, policyholders may consider taking protective actions before regulators step into the picture.  Click here to see a quick financial snapshot of 50 of the largest life insurers.  

Please reach out to us if you would like to discuss this in greater detail.  

Note: Although this article focuses on life insurance policyholders, annuity owners are impacted as well.  Additional details for life insurance and annuity policyholders may be accessed using the links below.

PHL Variable Insurance Company Rehabilitation

PHL Moratorium Summary

 

*Variable life policyholders are afforded the additional benefits only to the extent the cash value is invested in the unitized, Separate Account investment options…not for cash value allocated to any General Account options available under the variable policy.

**There is a process for requesting an exemption.  The exemption form may be found using this link:  Hardship Request for Exemption from Moratorium Form
 
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