Guides
Life insurer failures in U.S. history
From Executive Life and Mutual Benefit in 1991 to Penn Treaty and recent long-term care and universal life cases, what failed, why and how policyholders fared.
Large U.S. life insurer failures are rare, and the biggest wave came in 1991 with Executive Life and Mutual Benefit Life, both caused by risky investments. Since then the troubled companies have mostly been long-term care, annuity and universal life specialists whose long-dated promises outran their reserves. In nearly every case, policyholders kept most of their coverage, but some lost benefits above the guaranty limits, and some structured settlement and long-term care holders absorbed reductions.
The 1991 shock: Executive Life and Mutual Benefit
Executive Life (California, 1991). Executive Life Insurance Company was seized by the California Insurance Commissioner in April 1991. It was among the largest U.S. life insurers and held one of the world's biggest junk bond portfolios, valued at more than $6 billion, according to accounts of the case. The GAO testified on the failure the next year (T-GGD-92-13). The junk bond portfolio was sold in 1991-1992 and the insurance business moved into a new company, Aurora, in 1993. Years of litigation over the sale followed. California's insurance department estimated in 2005 that policyholders had recovered about 90 percent of their original policy rights, and later litigation settlements against those involved in the asset sale brought the total recovered above $930 million. The lesson most cited is concentration: a high-yield bond portfolio can lose value fast, and a run on withdrawals makes it worse.
Executive Life of New York. A separate New York subsidiary went into rehabilitation in April 1991. Its remaining business was mostly structured settlement annuities that pay for decades. After a shortfall, a New York court found it insolvent and approved a restructuring in April 2012, with news reports describing payment cuts of over $920 million to beneficiaries of settlements. The case shows that guaranty protection has limits when payments stretch across generations.
Mutual Benefit Life (New Jersey, 1991). Mutual Benefit, founded in 1845, was placed in rehabilitation on July 16, 1991 after real estate and mortgage investments soured and credit rating downgrades set off policyholder withdrawals. NOLHGA calls it the largest insolvency in its history, with more than $5 billion in covered obligations. A court approved the plan on January 28, 1994, and most business moved to a new company, with the individual life and annuity blocks sold to SunAmerica affiliates in 1999. NOLHGA reports guaranty associations incurred virtually no costs and general creditors were almost fully paid.
Both failures led regulators to strengthen solvency rules. The NAIC created its accreditation program in the late 1980s after several large insolvencies, and risk-based capital standards came afterward (see risk-based capital and life insurer solvency and The NAIC and how insurance rules are written).
The long-term care failures
Penn Treaty (Pennsylvania). Penn Treaty Network America and its subsidiary American Network Insurance Company sold long-term care policies to more than 126,000 policyholders in all 50 states and D.C. Pennsylvania placed them in rehabilitation on January 6, 2009, and the Commonwealth Court ordered liquidation on March 1, 2017. NOLHGA says the guaranty system's obligations were projected to approach $3 billion, paid over decades. Policyholders went to their state associations, with most claims administered by a third-party administrator. See the Pennsylvania guide for the state's rules.
The root cause was a classic pricing miss. Long-term care was priced on assumptions about how many people would lapse and how long claims would last. Fewer people dropped policies and claims were longer and costlier than assumed, and interest rates stayed low.
Senior Health Insurance Company of Pennsylvania (SHIP). A Pennsylvania court placed SHIP, which sold long-term care and home health care, in rehabilitation on January 29, 2020. Its liabilities exceeded its assets by $466 million at year-end 2018, according to the Pennsylvania Insurance Department's materials. Court proceedings over amended rehabilitation plans continued into 2021.
Recent cases
NOLHGA's insolvency search lists these among recent proceedings, and several are small or regional:
| Year | Company (home state) | Status listed by NOLHGA |
|---|---|---|
| 2017 | Penn Treaty and American Network (PA) | Liquidation |
| 2019 | Senior American Insurance Co. (PA) | Liquidation |
| 2020 | Senior Health Insurance Co. of Pennsylvania | Rehabilitation |
| 2022 | North Carolina Mutual Life; Time Insurance Co. (WI) | Liquidation |
| 2023 | Southland National Insurance Corp. (NC) | Liquidation |
| 2024 | Colorado Bankers Life; Bankers Life Insurance Co. (NC) | Liquidation |
| 2024 | PHL Variable Insurance Co. (CT) | Rehabilitation |
Colorado Bankers Life and Bankers Life Insurance Company. North Carolina's commissioner became liquidator under a December 30, 2022 order. Per the state's notice, guaranty associations began covering policies and annuities on November 30, 2024, and the deadline to file a proof of claim is November 30, 2026.
PHL Variable. Connecticut put PHL Variable Insurance Company and two captive subsidiaries into rehabilitation on May 20, 2024 after a review found a capital and surplus deficit of about $900 million. A court moratorium limited some payments, and universal life owners were offered choices such as reduced death benefits in exchange for lower premiums. In December 2025 the commissioner determined that a pure rehabilitation plan was not feasible because it would need guaranty association funds, which require a liquidation order. NOLHGA's July 2026 FAQ says rehabilitation continues and liquidation is anticipated. See Connecticut.
What the failures have in common
| Cause | Example |
|---|---|
| Concentration in risky assets (junk bonds, real estate) | Executive Life, Mutual Benefit |
| Underpriced long-dated promises | Penn Treaty, SHIP |
| Capital shortfalls in aging blocks of business | PHL Variable |
Some failures are sudden, as in 1991, while others play out slowly: Penn Treaty spent eight years in rehabilitation before liquidation. The newer concerns around asset risk and offshore reinsurance are covered in private equity's push into life insurance and Offshore reinsurance and Bermuda: why it matters to policyholders; these are debates about risk, not a record of failures.
What this means for you
- Know your insurer's financial strength rating and check it periodically (AM Best, S&P, Moody's and Fitch ratings explained).
- Be more careful with long-dated promises such as long-term care and structured settlements, where the exposure lasts decades.
- Keep amounts per insurer in mind against your state's guaranty limit (state life and health guaranty associations).
- If a company you own is in rehabilitation, keep paying premiums and read official notices (what happens if your life insurance company fails).
Key takeaways
- The largest modern failures, Executive Life and Mutual Benefit Life in 1991, came from junk bonds and real estate, and prompted tougher solvency rules.
- California's insurance department estimated Executive Life policyholders recovered about 90 percent of their original policy rights, and Mutual Benefit's guaranty associations incurred virtually no costs, according to state and NOLHGA accounts.
- Penn Treaty (liquidated 2017) shows how underpriced long-term care can strain the guaranty system for decades.
- Recent proceedings include small regional insurers and PHL Variable (rehabilitation since May 2024).
- Most policyholders kept coverage in every case, but benefits above guaranty limits and structured settlement payments carried the real losses.