What You Must Know
- A monetary examiner listed low rates of interest as one contributing issue.
- One other contributing issue: Investor-owned life insurance coverage.
- Prospects must apply for hardship exemptions to make money withdrawals.
Connecticut Insurance coverage Commissioner Andrew Mais has obtained approval from a state courtroom in Hartford to place PHL Variable Insurance coverage Co. — the insurer that when wrote the Phoenix Firms’ variable insurance coverage insurance policies and variable annuity contracts — in rehabilitation.
The rehabilitation order, which additionally consists of two reinsurers managed by PHL, limits advantages funds and money withdrawals, and it raises the chance that PHL might cease making trailing fee funds to brokers after six months.
PHL struggled due to the consequences of low rates of interest on its funding returns, the impression of the COVID-19 pandemic on life insurance coverage claims and mortality-related annuity profit funds, and the consequences of the life settlement business on the efficiency of common life insurance policies, in accordance with a petition Connecticut officers filed with the courtroom in Hartford.
As a result of life settlement buyers who purchased the common life insurance policies usually pay the minimal quantity to maintain the insurance policies in power, and make no use of the coverage’s personal funding options, they’ve led to the insurance policies producing a lot much less income than PHL had initially anticipated when it priced the insurance policies, Michael Shanahan, a Connecticut monetary examiner, mentioned in an affidavit included with the petition.
“These insurance policies comprise PHL’s most unprofitable block and are a serious reason for the continued deterioration of the businesses’ monetary situation,” Shanahan mentioned.
What it means: Monetary professionals with purchasers who could have life insurance coverage insurance policies or annuities written by PHL want to inform the purchasers concerning the new restrictions on funds to prospects.
The historical past: PHL Variable Insurance coverage was created in 1981 to write down variable merchandise for the corporate that finally turned often known as the Phoenix Cos.
PHL issued merchandise resembling time period life, entire life, fastened annuities and non-variable listed annuities in addition to common life, variable life and variable annuities.
The guardian firm was a policyholder-owned mutual. It demutualized in 2001.
The Nassau firms, a part of a holding firm managed by Golden Gate Capital, introduced plans to amass Phoenix in 2015 and, after closing on the deal in 2016, added a complete of $180 million in further capital to Phoenix insurance coverage firm associates.
Nassau created a reinsurer, Harmony, in 2019 to help efforts to wind down the PHL Variable enterprise. Projections created on the time confirmed that PHL and Harmony would have sufficient to pay all prospects in full, however, in 2020, PHL’s situation deteriorated, in accordance with the rehabilitation petition.
Regulators permitted different strikes meant to strengthen the corporate, together with a 2021 reorganization that separated PHL Variable from Nassau’s different insurance coverage companies.
The present state of affairs: In the present day, the one PHL workers are the corporate’s officers. Nassau firms deal with all firm operations underneath the phrases of service agreements.
PHL ended 2022 with about $2.2 billion generally account belongings, $800 million in separate account belongings and $900 million in detrimental capital and surplus, and it’s on observe to run dry in 2030, in accordance with the rehabilitation petition.
When PHL’s belongings are depleted, the corporate will nonetheless have about $1.4 billion in policyholder and annuity holder liabilities on its books, Connecticut Insurance coverage Division officers estimated.
Regulatory involvement: The rehabilitation petition reveals that Connecticut regulators put PHL underneath an order of administrative supervision in March 2023.