Pennsylvania Insurance Commissioner Michael Consedine announced Thursday that American International Group and its workers comp insurance units will pay Pennsylvania more than $16.8 million in fines and assessments.
The regulator said this reflects a settlement agreement in a multi-state probe that examined whether AIG violated premium reporting rules governing workers’ comp insurance. AIG was accused of under-reporting workers’ comp premiums to state regulators for years until mid-1990s to get smaller high-risk residual market assessments.
The penalty amount is the largest ever levied by the Pennsylvania insurance department. It includes $8.6 million in fines, $3.6 million to the Workers’ Compensation Security Fund, and $4.6 million in premium taxes and assessments.
Part of $146.5M Settlement With Regulators
The $16.8 million penalty is part of a $146.5 million settlement AIG reached with state regulators across the country in 2010. AIG will pay a total of $100 million in penalty, as well as $46.5 million in additional premium taxes and assessments, to the states before the end of June.
Pennsylvania was a lead state in achieving the final agreement, which became fully effective this week. This culminates an effort among state insurance regulators to investigate and resolve complex issues that occurred over an extensive period of time.
“State insurance regulators must be able to rely on accurate company financial data,” said Commissioner Consedine. “In AIG’s case, we found that the companies, which operated in a pooled arrangement, had underestimated their liabilities under inter-company policyholder guarantees.”
Consedine said that as part of this agreement, AIG corrected previously filed financial reports and reallocated approximately $2.1 billion of premium from others lines of insurance to workers compensation.
The final agreement is available on Pennsylvania insurance department’s website.
Additionally, AIG agreed last year to a $450 million workers’ comp class-action settlement. That settlement money would go to rival insurers who claimed AIG unfairly received a smaller share of the high-risk residual market assessments.