As a state regulator prepares to liquidate PHL Variable Insurance Co., a group of policyholders is accusing Nassau Financial Group and its private equity backer, Golden Gate Capital, of systematically “looting” the Hartford-based insurer.
In a flurry of court filings dated March 10, attorneys representing certain policyholders filed a motion to intervene in the rehabilitation proceeding, alleging Nassau and Golden Gate engaged in self-dealing, breach of fiduciary duty, fraudulent and negligent misrepresentation, violations of Connecticut’s Unfair Trade Practices Act, and civil racketeering under a federal statute.
Nassau Financial Group, headquartered in downtown Hartford, is a financial services company backed by private equity firm Golden Gate Capital. Nassau acquired PHL Variable, a subsidiary of the former Phoenix Cos., in 2016 for $217 million.
Nassau divested its direct ownership of PHL in 2021, while continuing to manage PHL’s operations through a series of administrative and investment services agreements. The state took control of PHL in May 2024 after it became insolvent.
The allegations came as a separate report filed by Connecticut’s acting insurance commissioner, Joshua Hershman, disclosed that Nassau charged PHL $76.3 million in management fees between May 2024 and December 2025 — while PHL was under state oversight.
The report says the fees “have been and continue to be materially above market.” Nassau disputes that characterization, according to the filing.
The policyholders’ memorandum describes the alleged conduct by Nassau and Golden Gate as “looting PHL at the expense of the claimants.”
A spokesperson for Nassau said in a statement: “The investors’ claims are without merit. We continue to cooperate fully with the Rehabilitator in its efforts to protect and serve PHL policyholders.”
The state placed PHL into rehabilitation in May 2024 — a court-supervised process under Connecticut’s insurer insolvency law in which the insurance commissioner takes control of a failing company and attempts to sell it, restructure it or, if those efforts fail, liquidate it.
Reached for comment, a spokesperson for the Connecticut Insurance Department said the rehabilitator has raised concerns about the fee structure in court filings, but has continued to pay Nassau under a “reservation of rights” while working with Nassau to address the issues.
The insurance department said the administrative services agreement supports critical operational functions during the rehabilitation.
The department said it considered moving the administrative services to another provider, but decided against it because of the associated cost and complexity, noting that a buyer of PHL or guaranty associations will ultimately move the services anyway.
At the start of the rehabilitation process in May 2024, a judge appointed the state’s then-insurance commissioner — Andrew Mais — as the rehabilitator.
Mais resigned in November 2025 and was replaced by Hershman, who became interim rehabilitator.
On Dec. 31, 2025, Hershman issued a report that concluded the planned sale of PHL had failed and liquidation was the only viable path forward — a reversal from Mais’ previous assurances that the company’s assets would be sold.
PHL’s uncertain future has left policyholders, especially those with benefits exceeding the $300,000 guaranty association limits — at risk of losing millions of dollars.
The policyholders’ March 10 memorandum alleges Nassau’s fee arrangements are part of a broader scheme that began almost immediately after it acquired PHL. The filing describes a web of what it calls sham affiliated-party reinsurance transactions that stripped PHL of real assets.
The memorandum also targets Mais, the former insurance commissioner, who served as both the regulator overseeing Nassau’s management of PHL and, after the state took control of the company in 2024, as its rehabilitator.
The filing says he approved or failed to stop the affiliated-party transactions that allegedly gutted the company.
Policyholders’ lawyers further argue that Hershman, the current rehabilitator, is reluctant to pursue what he has acknowledged are viable legal claims against Nassau and Golden Gate, because doing so would expose the insurance department’s own regulatory failures.
“Close to two years have gone by and rather than file suit, the rehabilitator appears content to simply preserve statutes of limitations while it overpays for policy servicing and allows bad actors to distance themselves from their looting, fraudulent transfers and self-dealing,” the memorandum states.
The insurance department pushed back on the conflict-of-interest allegations. The department said the receivership process is established by law and designates the insurance commissioner as the receiver for all insolvent insurance companies — a structure that was designed with the understanding that the commissioner also oversaw the company before receivership.
“A receiver is not barred from pursuing claims related to transactions previously reviewed by the Insurance Department,” the department said. “To the contrary, a receiver is expected to pursue all claims on behalf of policyholders, creditors, and the company — and is doing so in this case.”
The insurance department reiterated that the rehabilitator has viable claims against third parties, including Nassau and Golden Gate, and has taken steps to preserve those claims while negotiations continue.
Any settlement of those claims must be in the best interests of policyholders and will be subject to court approval after a hearing and notice to policyholders and creditors, the department said.
A representative for Golden Gate Capital declined to comment.
Edward Stone, a Stamford attorney who represents PHL policyholders and has experience in insurance insolvency cases — including the Executive Life Insurance Co. of New York liquidation — is among the lawyers seeking to intervene on behalf of policyholders
He is working with prominent plaintiff-side firm Robbins Geller Rudman & Dowd — one of the largest class action litigation firms in the country — seeking court permission to pursue tort claims independently.
The case is pending before Judge Daniel J. Klau in Waterbury Superior Court.
