Annie Benjamin paid $99,000 to an insurance company to secure retirement income for life. That company, PHL Variable Insurance Co., collapsed in 2024, leaving Benjamin and about 100,000 other policyholders facing a $2.2 billion shortfall. PHL’s failure has drawn attention to risks growing within the life insurance industry and to concerns about state regulators’ ability to protect consumers.
Benjamin, a retired executive from Minnesota, invested in an annuity from PHL ten years ago. She trusted that the insurer and its regulators would ensure she would receive steady income during retirement. Now, her account is frozen, and she is unable to access the promised funds. The mental and financial strain weighs heavily on her, as she said, “What you thought you could depend on you no longer have… Basically, I am stuck.”
The life insurance industry has changed in recent years. Insurers affiliated with private equity firms and asset managers have begun taking greater risks with investments and engaging in complex reinsurance deals. Reinsurance lets insurers shift some policyholder obligations to related companies, often in different states or countries where regulators do not make financial details public. This practice can hide the true risk insurers carry and confuse policyholders seeking to assess their company’s financial strength.
PHL’s collapse stemmed from multiple factors. Its investments fell short of expectations, the high number of deaths during the COVID-19 pandemic increased claims, and complex reinsurance arrangements with affiliates added to the damage. One key problem was a 2019 reinsurance deal backed by an asset valued at $450 million that turned out to be worthless. Regulators have criticized this kind of excess-of-loss agreement, as it cannot be quickly converted into cash to meet claims. Yet some states allowed PHL to count such arrangements as assets.
Experts argue that state insurance regulators failed to act decisively to protect policyholders. As Larry Rybka, a financial adviser, put it, “The regulators are not just a little bit wrong. They are so far off that it’s catastrophic.” Thomas Gober, a former state insurance examiner, warned that PHL’s failure is an example of what can happen when insurers conceal large financial holes on their balance sheets. By the time such issues surface, it may be too late for policyholders.
When an insurance company fails, policyholders rely on state guaranty associations to pay claims. These associations are funded by other insurers and have caps on payouts. For PHL, policyholders may only recover between 34% and 57% of their claims after the company’s liquidation. Payout limits range from $250,000 to $500,000 depending on the state, which leaves many people with losses far exceeding those amounts.
Investigations have revealed that other insurers, such as American Equity Investment Life Insurance Co., have engaged in reinsurance transactions that also depart from national accounting guidelines. These deals may put policyholders at risk if the promises are not fully backed or cannot be quickly converted into cash to pay claims.
The fallout from PHL’s collapse underscores risks consumers face when investing for retirement through life insurance products. It highlights the challenge for policyholders to understand complex arrangements behind the scenes and raises questions about the sufficiency of regulatory oversight designed to safeguard their money.
For Annie Benjamin and many others, the hope to receive steady retirement income was shattered when an insurer failed to meet its obligations. Their situation serves as a reminder that even financial promises once considered safe can carry unexpected risks.
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