AIG Agrees to Pay $9.1 Million in Settlement with Pennsylvania Insurance Department |
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Written by U.S. Insurance News
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Sunday, 23 March 2008 |
American International Group Inc. has set a record in Pennsylvania, but not the kind it wanted to.
Joel Ario, acting Insurance Commissioner for the state, recently announced a settlement with AIG that requires the carrier to pay more than $9 million in penalties and investigative costs for filing false financial information. The fine is a record level.
"AIG is paying the largest penalty ever to the Insurance Department to resolve violations of our insurance laws," Ario said. "This reflects the seriousness of the violations and the fact that Pennsylvania is the primary regulator of AIG commercial property-casualty insurance companies."
The commissioner explained that the ability of his office to "fairly regulate" the business of insurance means it must rely on the veracity of financial reports filed by companies doing business in Pennsylvania. Thus, in addition to resolving bid-rigging allegations against AIG, the settlement requires the company to implement new compliance measures to ensure accurate reporting and increase the transparency of commission payments to agents and brokers.
"Financial reporting must be accurate for us to protect insurance consumers and be certain that companies are solvent," Ario explained.
According to the terms of this settlement, AIG will:
- Pay $9.1 million to the state in penalties and investigative costs for financial misreporting.
- Provide detailed annual reports regarding the company's reinsurance arrangements.
- Provide extensive commission disclosure to commercial customers.
- Implement business reforms and cooperate in any related investigations.
Last month, a federal court found a former AIG executive and four former Gen Re executives guilty for their part in a transaction related to the financial misreporting that is at the heart of the Pennsylvania Insurance Department's actions. In addition to the false reporting, the department's investigation of AIG focused on improper activity relating to the company's bid-rigging and commission practices.
Ario's office is also working with other states to scrutinize a third area of AIG's misconduct related to the underreporting of workers' compensation premiums.
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