Most people don’t think much about the insurance company behind their policy, until something goes wrong. In 2024, roughly 100,000 policyholders of PHL Variable Insurance found that out the hard way. One of them, Annie Benjamin, had paid $99,000 into a policy meant to provide retirement income for life. When PHL collapsed, she was left with far less than promised. In her words, what she thought she could depend on, she no longer had.

The collapse traced back to a 2019 reinsurance deal built around a $450 million asset that turned out to be worth essentially nothing, leaving a $2.2 billion shortfall. State guaranty association rules capped payouts to affected policyholders at $250,000–$300,000 per policy, regardless of what the policy was actually worth.

Why PHL Won’t Be the Last

PHL’s failure is a visible symptom of a broader shift across the life insurance industry:

• $700 billion in U.S. life insurance assets are now controlled by private equity firms, whose portfolios hold roughly double the industry’s average share of illiquid investments.
• Offshore reinsurance has grown from $205 billion in 2014 to $928 billion in 2024, now over 60% of all reinsurance U.S. insurers purchase, and much harder for regulators to see into.
• Economists estimate a 2008-scale downturn could leave publicly traded U.S. life insurers facing a combined $150 billion capital shortfall.

None of this means every carrier is at risk. It does mean ratings matter more than they have in decades, and can shift faster than most people expect.

Why This Matters More for a Trust-Owned Policy

Life insurance inside an irrevocable life insurance trust (ILIT) usually has one job: providing liquidity for estate taxes, inheritance equalization, or a beneficiary’s future, guaranteed. If the carrier behind it is downgraded or fails, the guaranty cap may pay out far less than the death benefit, the trustee may need to fund higher premiums, or a claim can be delayed for years, exactly when a beneficiary needs it most.

What You Can Do Now

1. Confirm your carrier’s current financial strength rating with your trustee.
2. Request a review of how the policy is actually performing, not just whether premiums are current.
3. Ask about your state’s guaranty association coverage limit.
4. If the rating has weakened, ask about options: a 1035 exchange, reissuing coverage, or a life settlement.

A policy review costs nothing. The only real cost is not knowing where you stand.

We’re Already on It

We’re reviewing the trust-owned policies in our administration and reaching out to grantors and beneficiaries whose carriers have been downgraded or flagged. If you’d rather not wait for that call, just reach out, there’s no cost and no obligation.

Read the full LITCO Carrier Risk Report →