When Annie Benjamin invested $99,000 in an annuity 10 years ago, she trusted the insurance company to provide her with retirement income. She also relied on the company\u2019s regulator to ensure the insurer could meet its obligations. <\/p>\n
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Benjamin\u2019s trust in both was misplaced. PHL Variable Insurance Co., a private equity-owned life insurer, collapsed in 2024 and is heading for liquidation. Benjamin\u2019s account is frozen, and 100,000 other PHL policyholders face a $2.2 billion shortfall, public documents<\/a> show.<\/p>\n \u201cWhat you thought you could depend on you no longer have,\u201d said Benjamin, a retired 3M executive from Minnesota who has an autoimmune disease. \u201cI try not to get emotional about it, but mentally it has really impacted me. Basically, I am stuck.\u201d<\/p>\n With the decline of pensions, a rising number of Americans count on life insurance companies\u2019 promises to generate reliable retirement income, but it\u2019s no longer the staid, steady industry of the past. <\/p>\n Aggressive companies affiliated with private equity firms and asset managers have been snapping up insurers and, in some cases, engaging in highly complex deals that can imperil policyholders. Such deals resulted in a bigger hole faced by PHL policyholders, documents show. <\/p>\n People like Benjamin have almost no way to know whether the money they pay into their premiums is being placed at risk \u2014 the details of such arrangements are buried in annual financial statements. It\u2019s the responsibility of state regulators to ensure that the money is protected and the insurers themselves are financially sound. <\/p>\n But the collapse of PHL illustrates how state regulators are failing to protect consumers, experts say.<\/p>\n \u201cThe regulators are not just a little bit wrong,\u201d said Larry Rybka, founder of registered investment adviser Valmark Financial Group<\/a> in Ohio. \u201cThey are so far off that it\u2019s catastrophic.\u201d<\/p>\n Mary Quinn, spokeswoman for the Connecticut Insurance Department, declined to answer questions about the PHL deals it approved, saying in a statement the transactions \u201cmay become the subject of future legal action.\u201d <\/p>\n PHL did not return phone calls seeking comment. Golden Gate Capital, PHL\u2019s private equity owner, declined to comment.<\/p>\n Grim discovery<\/p>\n The business of life insurance used to be boring. An insurer would take policyholders\u2019 premiums and invest the money in high-quality stocks, bonds and residential mortgages so it could pay future obligations. <\/p>\n But the model has changed, with more aggressive insurers taking on more risks in their investments, research has shown<\/a>. Some of the companies are offloading policyholder obligations \u2014 a common practice known as reinsurance \u2014 to affiliated insurers in U.S. states and other countries where financial statements are not made public. This secrecy keeps policyholders from knowing how solid their insurers are.<\/p>\n As in most insurance company failures, PHL flopped for several reasons. Its investments \u201cdid not perform as expected,\u201d Connecticut regulators said, and Covid deaths shattered its actuarial assumptions, requiring PHL to pay out on more life insurance policies than it had expected. <\/p>\n But PHL also conducted complex and confidential reinsurance deals with affiliates, regulatory documents show<\/a>, adding to the losses policyholders now face.<\/p>\n Reinsurance helps insurers reduce risks in their operations by letting them shift policyholder obligations to different companies. After a transfer, regulators allow the original insurer to keep a smaller capital cushion on hand because it now has fewer obligations on its books.<\/p>\n Insurers like setting aside less capital because it allows them to write more policies and increase earnings. The downside: Thinner cushions reduce an insurer\u2019s ability to meet its obligations, raising the specter of policyholder losses.<\/p>\n Only when investigators dug through the PHL wreckage did they make a grim discovery, documents show<\/a>: An asset backing a 2019 reinsurance transaction and subsequently valued at $450 million was worthless.<\/p>\n The asset used to back the deal involved an arrangement with a PHL affiliate that agreed to cover policyholder claims above a certain amount, known as an excess-of-loss agreement. The National Association of Insurance Commissioners<\/a>, which coordinates state insurance regulation to protect policyholders<\/a>, does not approve of using such agreements as assets because they cannot be sold quickly to pay claims. <\/p>\n But state regulators can authorize departures from the organization\u2019s principles, and that is what happened in the PHL case. <\/p>\n \u201cThe failure of PHL is the perfect example of what happens when an insurance company hides a black hole on its balance sheet,\u201d said Thomas Gober<\/a>, a former examiner for the Mississippi Insurance Department who was recently invited to brief members of the U.S. Senate Committee on Health, Education, Labor and Pensions about his growing concerns about life insurance company practices. <\/p>\n \u201cOnce you can finally see it, the hole has gotten so big that it\u2019s too late.\u201d <\/p>\n A report this year from Conning & Co., an industry authority, said excess-of-loss agreements pose \u201cunderappreciated risks\u201d to the industry. \u201cThere is the risk that these assets could dissipate suddenly and leave insurers exposed,\u201d the report said.<\/p>\n In an insurance company failure, there is no backstop equivalent to the Federal Deposit Insurance Corp. Instead, private entities known as state guaranty associations collect money from insurers to cover policyholders\u2019 losses. The associations limit the payouts, meaning policyholders can receive far less than they invested or were promised. <\/p>\n PHL policyholders\u2019 payouts, for example, are limited to $250,000 to $500,000, depending on which states they live in. Connecticut officials said this month<\/a> that policyholders are likely to receive 34% to 57% of their claims from PHL in a liquidation of the company. <\/p>\n Andrew Mais was Connecticut\u2019s insurance commissioner when the confidential PHL deal was approved. He retired abruptly last fall and joined Deloitte, where he is a senior adviser. <\/p>\n Mais did not return a phone message left at a number associated with him. NBC News emailed the Deloitte spokeswoman twice asking to interview Mais about PHL. She did not respond. <\/p>\n \u2018Pay claims today\u2019<\/p>\n Connecticut\u2019s insurance department is not the only one that has approved reinsurance deals that disregard accounting standards <\/a>set by the National Association of Insurance Commissioners. Vermont\u2019s has, as well, according to confidential filings from American Equity Investment Life Insurance Co., a big annuity provider in Iowa.<\/p>\n Gober spotted the American Equity documents last year when they appeared briefly online. He downloaded them before they disappeared. <\/p>\n Experts say policyholders can face threats from reinsurance deals when promises haven\u2019t been truly transferred to other companies and the IOUs boomerang to the original insurers, which may not have the cushion to cover them. Another risk arises when the assets backing a reinsurer\u2019s promises cannot be easily sold to pay claims.<\/p>\n The American Equity documents show three reinsurance transactions that depart from National Association of Insurance Commissioners guidelines intended to address those risks. <\/p>\n \u201cAn insurer has to be able to pay claims not just in the future but today,\u201d Gober said. \u201cAnd if the company cannot convert the instrument to cash to pay claims today, it has no value.\u201d <\/p>\n American Equity is a unit of Brookfield Wealth Solutions, a subsidiary of Brookfield Corp., a $110 billion Canadian company that also has real estate, asset management and private equity operations<\/a>. Brookfield Wealth Solutions bought out American Equity in 2024 after having taken an initial stake in 2021. Brookfield\u2019s investment in the insurer came from its own capital, lawyers for the company said. American Equity has 600,000 policyholders.<\/p>\n The three transactions in question involve roughly $6 billion in obligations owed to American Equity policyholders.<\/p>\n![\"Annie](\"https:\/\/www.newsbeep.com\/us\/wp-content\/uploads\/2026\/05\/260415-Annie-Benjamin-gk-ab7b20.jpg\")
Annie Benjamin.Courtesy Annie Benjamin<\/p>\n![\"Image:](\"https:\/\/www.newsbeep.com\/us\/wp-content\/uploads\/2026\/05\/260415-Thomas-D-Gober-gk-c9c478.jpg\")
Thomas D. Gober.Courtesy Thomas D. Gober<\/p>\n