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Insurance Giant Faces Liquidation Over "Worse Than Thought" Finances
3 Jan
Summary
- State regulators may liquidate PHL Variable Insurance Co. instead of rehabilitation.
- Regulators threaten lawsuits against Golden Gate Capital and Nassau Financial Group.
- PHL's financial problems are worse than previously estimated, regulators claim.
Connecticut state regulators have abandoned plans to rehabilitate PHL Variable Insurance Co., now considering liquidation due to the insurer's significantly deteriorated financial condition, which is worse than previously understood. The interim head of Connecticut's insurance department, Joshua Hershman, stated in a court filing on New Year's Eve that rehabilitation is no longer feasible as PHL lacks sufficient assets for a strategy that would benefit policyholders more than liquidation.
Regulators also indicated potential lawsuits against Golden Gate Capital and its insurance arm, Nassau Financial Group, for alleged breach of fiduciary duty if a settlement isn't reached, although Nassau disputes these accusations. PHL, acquired by Golden Gate a decade ago, is now seen as a cautionary tale, with authorities citing underperforming investments and failed captive reinsurance deals as contributing factors to a substantial shortfall, estimated at $2.2 billion last year.
Policyholders have faced hardship, with over $500 million in benefits withheld as of last September. Hershman acknowledged the difficulties posed by the lengthy rehabilitation process. While negotiations are ongoing, Nassau maintains that PHL's issues predate its involvement and that transactions were regulator-approved, vowing to defend itself if litigation ensues.
