Investors holding $130M in PHL benefits slam liquidation, seek to intervene

Update: Tuesday afternoon, Judge Daniel J. Klau scheduled a status conference for Feb. 10 at 2:30. The rehabilitator "shall be prepared to update the court regarding the status of plans for an orderly liquidation of the Companies," Klau's order states. "Although this status conference is not a hearing on recently filed motions seeking emergency relief, the Rehabilitator shall also be prepared to discuss its position on those motions."

Investors holding PHL Variable universal life policies with combined death benefits totaling more than $130 million say they paid monthly premiums north of $1 million while Connecticut regulators fed them false hopes of a company rehabilitation.

The hefty premiums helped pad the PHL bottom line for 19 months and now investors stand on the losing end of potential liquidation. Interim Insurance Commissioner Joshua Hershman made the surprising pivot to liquidation in a Dec. 31 status report.

Investors are not happy.

On Tuesday, BroadRiver Asset Management filed an emergency motion to intervene. The firm represents policyholders who own 32 in-force UL policies with cumulative death benefits of $130.3 million.

Large UL policyholders “have funded the PHL estate in reliance on persistent, false representations by the Rehabilitator that a rehabilitation plan – where death benefits would remain due and owing by PHL with various premium cost adjustments to address actuarial projections – would be forthcoming,” reads a memorandum accompanying the motion.

The BroadRiver policyholders have paid $57.1 million in premium payments, $19.7 million in the 19 months since Connecticut regulators began their rehabilitation of PHL Variable, the memo reads.

From the end of 2023 to September 2025, the amount of cash and short-term investments held by the PHL companies increased from $103 million to $437.5 million. Regulators fattened PHL’s coffers via the large premiums paid by investors, the BroadRiver motion says.

John L. Cesaroni, a partner at Zeisler & Zeisler law firm in Bridgeport, Conn. and attorney for BroadRiver, did not respond to a message seeking comment on the emergency motion.

A Connecticut Insurance Department spokeswoman said the department cannot comment on pending litigation.

Three main issues outlined

Large policyholders have been frustrated throughout the 19-month rehabilitation period by three issues:

The $300,000 moratorium. When former insurance commissioner Andrew Mais took over PHL he sought an accompanying moratorium that capped PHL benefits at $300,000. Large policyholders say the moratorium discriminates against them while not impacting smaller policyholders.

For BroadRiver investors, it reduced collectible death benefits on policies that matured during the rehabilitation from $29 million to $1.2 million “without any corresponding reduction in premiums payable to keep their policies in force, and with tens of millions more at risk as policies mature in the future,” the memo reads.

Despite paying nearly $20 million in premiums during the 19 months, the rehabilitator “is only promising to pay out approximately $9.6 million,” the memo adds.

There are about 3,600 “over the cap” UL policies that remain in force, the memo claims.

Rehabilitation strategy. During the 19 months, Mais’s office pursued insurers to take over or reinsure all or part of the PHL book of business. BroadRiver investors say that was never a realistic strategy.

“As recently as November 20, 2025, the Rehabilitator reported it was negotiating with eight bidders and promised to file the terms of a rehabilitation plan by the end of 2025,” the memo states. “All of this induced over the cap UL Policyholders to continue paying full premium amounts.”

Mais retired on Nov. 28 and was succeeded by Hershman.

Lack of information access. Large policyholders tried multiple times to gain access to PHL financial information and were denied.

“This left UL Policy Holders in the dark, facing the Hobson’s choice of either lapsing their policies or continuing to pay full premiums with no way to assess what benefits might accrue to keeping their polies in force,” the memo says.

A liquidation order would result in the termination of UL policies. That means BroadRiver policyholders would be left with nothing more than guaranty association coverage (limited by the $300,000 cap or whatever else the guaranty association agrees to) and a subordinated claim in a PHL liquidation.

A liquidation will not likely be finalized before the end of 2026, the memo states, leaving BroadRiver investors to ponder whether to continue paying $1.3 million in monthly premiums for what could end up as more “sunken costs.”

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InsuranceNewsNet Senior Editor John Hilton has covered business and other beats in more than 20 years of daily journalism. John may be reached at [email protected]. Follow him on Twitter @INNJohnH.