Planning is underway for the potential liquidation of PHL Variable Insurance Co. as regulators continue efforts to secure a buyer that could preserve policyholder value beyond guaranty association limits.
According to a recent status update filed with the Connecticut Superior Court, the rehabilitator - along with interim Connecticut Insurance Commissioner Josh Hershman - is preparing a transition plan ahead of a formal liquidation order expected later this year. The move follows a determination earlier in 2026 that the insurer’s existing rehabilitation plan was no longer viable.
PHL Variable Insurance Co. was placed into rehabilitation in May 2024 alongside two affiliated captive insurers after regulators identified a significant capital shortfall, with the company’s capital and surplus estimated to be approximately $900 million in deficit. At that time, projections indicated that PHL’s assets could be depleted by 2030, leaving roughly $1.46 billion in outstanding policyholder liabilities.
Under the proposed liquidation framework, approximately 70% of policyholders are expected to be fully protected through state guaranty associations, with benefits continuing to be paid in the ordinary course. However, policyholders with benefits exceeding guaranty caps may face reductions, making the pursuit of a third-party transaction a key priority for regulators.
Hershman has emphasized that a sale of the business, or portions of it, remains critical to improving outcomes for these “over-the-cap” policyholders. The preferred scenario would involve an external party assuming control of PHL’s operations, acquiring its assets, and continuing policies under modified terms.
To support this effort, regulators are working with the National Organization of Life and Health Guaranty Associations (NOLHGA) to explore options for transferring the guaranteed portion of the business. Initial steps have included sharing data and facilitating the solicitation of potential bids, though the process remains in its early stages.
Previous attempts to secure buyers have faced challenges, according to a Best Wire report. Late in 2025, two proposals were received to acquire certain blocks of business, with terms that would have largely preserved policyholder benefits. However, those transactions ultimately collapsed due to insufficient assets to support the deals under the proposed structures.
Efforts to involve guaranty associations in supporting these transactions were also unsuccessful, as the associations indicated they would not participate without a formal liquidation order in place.
The situation continues to evolve as regulators balance the need for an orderly wind-down with efforts to maximize recoveries for policyholders
