AIG agrees to $13 million out of court settlement after legal battle

by David Masters

Story link: AIG agrees to $13 million out of court settlement after legal battle

American International Group (AIG) have come to a $13.5 million settlement with the Pennsylvania Insurance Department after allegations of false financial information and bid-rigging.

The allegations relate to an investigation by the department into an alleged false reinsurance deal between AIG and General Re Corp, which involved financial misreporting. Last month, a former AIG executive and four former Gen Re executives were taken to federal court and found guilty of financial misreporting. The investigation also flagged up problems in AIG with bid-rigging, improper commission practices, and an under-reporting of worker’s compensation premiums.

The $13.5 million settlement requires that AIG implements new systems to comply with the law regarding accurate reporting. They have also been told to increase the transparency of commission payments to agents and brokers.

$4.4 million of the settlement has already been paid. However, under the terms of the settlement, AIG neither denies nor admits to the allegations.

Joel Areo, acting insurance commissioner, said of the settlement: “Our ability to fairly regulate the business of insurance requires that we must be able to rely upon the truthfulness of financial reports filed by companies doing business here.

“AIG is paying the largest penalty ever to the Insurance Department to resolve violations of our insurance laws. This reflects the seriousness of the violations and the fact that Pennsylvania is the primary regulator of AIG commercial property-casualty insurance companies.”