PHL Variable Life Policies: Challenges Faced by Policyholders and Regulators

Insurance policyholders holding PHL Variable universal life policies, amounting to over $130 million in death benefits, claim they have spent more than $1 million monthly in premiums during a regulatory intervention. Over 19 months, these premiums aimed to bolster a Connecticut regulator-supervised rehabilitation, which now veers towards potential liquidation, as Interim Insurance Commissioner Joshua Hershman suggests in a recent report. This unfolding scenario draws significant attention from the insurance industry, particularly due to its impact on regulatory compliance requirements and policyholder rights.

Policyholder Intervention and Financial Strain

BroadRiver Asset Management, representing affected policyholders, filed to intervene, advocating for those holding 32 policies worth $130.3 million in death benefits. The firm argues policyholders expected a rehabilitation plan to preserve death benefits, with actuarial-based premium adjustments. They report paying $57.1 million in premiums, including $19.7 million post-rehabilitation initiation, while PHL's assets surged from $103 million to $437.5 million. This substantial outlay underscores critical concerns for insurers and regulatory bodies balancing rehabilitation aims with policyholder expectations.

Challenges and Potential Liquidation Implications

Policyholders express frustration over several issues: a perceived discriminatory moratorium limiting benefits to $300,000, impractical reinsurance proposals, and failed attempts to access PHL's financial details. These challenges amplify uncertainty about continued premium payments, especially with the potential liquidation threatening policy terminations. This concern poses a dilemma for BroadRiver policyholders assessing their substantial premium investments as possible losses. The broader insurance landscape—and associated underwriting and risk management practices—are keenly observing these developments, tracking their influence on industry regulations and carrier strategies. The Connecticut Insurance Department, citing ongoing litigation, has declined to provide comments.