Monthly LRA Update

JUDICIAL DEVELOPMENTS

PHL Variable – Court Sets Hearing on Moratorium Changes

On July 29 the Connecticut Superior Court scheduled a hearing for October 21 to consider modifying the current moratorium on access to certain benefits owed by PHL Variable. The modification is expected to offer universal life policyholders two additional options instead of continuing to pay full premiums for the current coverage:

1. Reduce the face amount of their death benefits with correspondingly lower cost of insurance or premium payments; or
2. Convert their policy to a claim for a fixed amount in the rehabilitation proceedings (with no ongoing cost of insurance or premium payments required).

PHL Variable Insurance Company had halted underwriting and issuing new policies in 2019. Since that time, PHL has experienced significant deterioration of its financial condition, despite capital contributions from its parent companies, various reorganizations, and certain reinsurance transactions.

Despite these efforts, PHL’s financial condition continued to deteriorate. On March 31, 2023, the Connecticut Insurance Commissioner placed PHL under an order of administrative supervision to help safeguard the financial security of the company. The Connecticut Insurance Department produced modeling that “demonstrates that the Companies are in such condition that further transaction of their business would be financially hazardous to policyholders, creditors, and the public,” with aggregate assets projected to be exhausted by 2030, and with approximately $1.46 billion of policyholder liabilities projected to remain unpaid.

PHL has been in rehabilitation proceedings in the Connecticut Superior Court since May 2024, with the Connecticut Insurance Commissioner having been appointed as Rehabilitator. The Court finalized a Moratorium Order on June 25, 2024, which specified which life insurance and annuity benefits could continue to be paid (while preventing payments that are not specifically excepted).

The October hearing will consider modifications to the moratorium that would give options to universal life insurance holders. Additionally, fixed income annuity owners who have not yet activated their income rider or are currently receiving systemic withdrawals will also be allowed two options:

1. Activate the income rider (to the extent available under the contract); or
2. Receive a one-time surrender-charge free distribution of the “Free Withdrawal Amount.”

Docket: Insurance Commissioner of the State of Connecticut vs. PHL Variable Insurance Company, et al., Case No. CV-24-6185151-S

REGULATORY DEVELOPMENTS

Regulators Release Proposed Revisions to Consolidated Reports of Condition and Income (Call Reports)

On July 10 the FDIC, Federal Reserve, and OCC jointly published a report to revise the Consolidated Reports of Condition and Income (Call Reports). These revisions are related to the proposed rule to modify the Enhance Supplementary Leverage Ratio (eSLR) standards, which was covered in the June LRA update.

The proposed revisions include updating the FFIEC 031 Call Report with two additional line items on Schedule RC-R, Part I, Regulatory Components and Ratios, to reflect leverage buffer standards under the June proposal. Notably, the line items would be reported only by depository institutions of global systemically important bank holding companies (GSIBs).

Regulators have requested comment on the proposed revisions. Comments must be submitted by September 8, 2025.