CT Regulators Propose More Flexible PHL Variable Policy Benefits Amid Moratorium

Connecticut regulators have taken control of PHL Variable Insurance Co. following the company’s financial difficulties, implementing a moratorium on benefits to stabilize the situation. Insurance Commissioner Andrew Mais has petitioned the state Superior Court to modify the moratorium to allow greater flexibility in distributions for universal life and fixed indexed annuity policyholders. This request comes amid ongoing efforts to rehabilitate PHL Variable and potential plans to sell parts or all of the insurer's business by the end of the year. The moratorium had initially helped prevent a rush of benefit claims that could further destabilize the company’s finances.

The moratorium adjustment would give universal life policyholders two additional payout options, while fixed indexed annuity holders could receive enhanced withdrawal choices depending on their current income rider status. However, policyholders with high-value contracts, including those used for estate planning or business succession, have expressed concerns about the opaque nature of the insurer's financial disclosures and the impact of proposed restrictions limiting death and maturity benefits to $300,000. These limitations effectively categorize policyholders into two groups: those fully paid under the cap and those potentially receiving reduced benefits.

Policyholder correspondence submitted during the public comment period highlights a broad spectrum of affected individuals, from blue-collar retirees relying on their policies for essential retirement income to wealthy investors using policies for wealth transfer. Examples include long-time workers who depend on their PHL Variable benefits for medical expenses and daily living costs, underscoring the moratorium's human impact. The Division of Insurance’s rehabilitation plan, due later this year, aims to balance these competing interests while preserving policyholder value as much as possible.

The situation reflects the complex challenges insurers face when financial distress affects annuity and life insurance products, including regulatory oversight, actuarial uncertainty, and fairness across policyholder classes. The upcoming court hearing scheduled for October 21 will further assess whether the moratorium modifications proposed by Commissioner Mais adequately serve the diverse policyholder base and meet regulatory standards. This case underscores the need for transparency, well-defined policyholder protections, and strategic solutions in insurance company rehabilitation efforts to maintain market stability.