Insurance Trusts Sue Golden Gate Private Equity, Claim RICO Scheme Drained $2 Billion From 175-Year-Old Insurer

PHL Variable Insurance Company survived the Civil War, two World Wars, and the Great Recession. According to a proposed class action filed September 25, 2026, in the U.S. District Court for the District of Connecticut, it did not survive its private equity owners.

Three insurance trusts brought the suit against Golden Gate Private Equity and its Nassau Financial Group affiliates, alleging a systematic scheme to drain PHL of assets over nearly ten years, according to Insurance Business Magazine. The complaint invokes the federal Racketeer Influenced and Corrupt Organizations Act, better known as RICO, a law more commonly associated with organized crime prosecutions than insurance regulation disputes.

The Deal That Set It Up

PHL Variable traces its roots to a Hartford life insurer founded in 1851. Its parent company, The Phoenix Companies, became the target of Golden Gate's acquisition plan in 2015, when the firm created Nassau Financial Group with a $750 million capital contribution for that express purpose, the complaint alleges.

Nassau bought PHL and Phoenix for $217.2 million in 2016, with Golden Gate covering the entire purchase price, according to the filing. To win approval from regulators, the defendants allegedly told the Connecticut Insurance Department they had no plans to liquidate the company. What happened over the following years is the core of the plaintiffs' case, and it remains an allegation, not a court finding.

What's at Stake for Policyholders

The proposed class covers approximately 2,900 individual policyholders. Their death benefits are currently capped at $300,000 under a court-imposed freeze, regardless of how much coverage they actually purchased or how many years they paid premiums. Some of those policyholders bought coverage worth as much as $2 million, according to Insurance Business Magazine.

That gap, between what people paid for and what they can now collect, is the practical harm the lawsuit is built around. If a family bought a $2 million policy expecting that payout to cover a mortgage, college tuition, or a spouse's retirement, and the insurer can now only pay $300,000, the shortfall isn't hypothetical. It's the difference between financial security and a serious hole in a family's finances.

The Harder Question: Can PE Owners Be Held Liable

The case tests something bigger than one company's finances. It asks whether private equity owners can be held personally and financially liable, including under a criminal racketeering statute, for decisions made inside a company they acquired and controlled.

That's a genuinely open legal question. Private equity firms typically structure acquisitions through layered holding companies specifically to insulate the parent firm from the liabilities of the businesses it buys. Whether that structure holds up when a state insurance regulator approved the deal based on representations the complaint alleges were false is exactly what a federal judge in Connecticut will now have to sort out.

Critics of private equity ownership in regulated industries like insurance and utilities have long argued that state regulators lack the tools or the will to catch asset-stripping until it's already happened. Defenders of the PE model would point out that regulators did approve this specific deal in 2016, and that an unproven complaint alleging a decade-long scheme is not the same as a finding of wrongdoing. Both things can be true at once: a regulator signed off, and a federal court may still find the sign-off was based on misrepresentations if the plaintiffs can prove that.

Neither Golden Gate Private Equity nor Nassau Financial Group has issued a public response to the complaint as of this writing. No criminal charges have been filed against either entity, and no court has ruled on the RICO allegations.

The case adds to a broader pattern of litigation this year testing whether private equity owners can be held accountable when regulated companies they control end up unable to pay what they owe. Courts are also weighing similar questions in disputes involving Thames Water's creditors and Patrick Drahi's Optimum businesses. The Connecticut case is now in its earliest stage. A scheduling conference and Golden Gate's formal response to the complaint are the next steps to watch.