AIG Reaches $35 Mln Settlement With New York DFS For Insurance Law Violations

(RTTNews) - Insurer American International Group, Inc. agreed Friday to pay a penalty of $35 million to the New York State Department of Financial Services or DFS, to settle claims of insurance law and other violations related to its former subsidiaries, ALICO and DelAm.

The DFS probe found that ALICO and DelAm solicited insurance business in New York without a license and made intentional misrepresentations and omissions to the DFS about the activities.

"No company has a right to ignore the laws that every other insurer has to follow. This type of misconduct is unfair to its competitors and puts consumers at risk. We are pleased that AIG has decided to resolve this matter," DFS Superintendent of Financial Services Benjamin Lawsky said in a statement.

ALICO, while operating as a subsidiary of AIG in 2009, represented to the DFS that its activities in New York were primarily "'back office functions." However, DFS' probe found that ALICO went well beyond engaging in "back office" functions.

ALICO and DelAm were found to be doing insurance business in New York. They and certain alien insurers had collected about $900 million in premiums from multinational corporations from 2007 to 2012 in New York.

AIG sold off ALICO and DelAm to rival insurer Metlife, Inc. (MET) in 2010. However, the unlicensed insurance activity continued under Metlife also. ALICO, DelAm, AIG, and MetLife were found to be involved in extensive insurance activities from their respective offices in New York.

MetLife had earlier reached a $60 million settlement with the DFS related to the misconduct by ALICO and DelAm on March 31, 2014. Of the $60 million, a $50 million fine was to be paid to DFS and $10 million to the Manhattan District Attorney's Office.

AIG closed Friday's regular trading session at $53.57, up $0.64 or 1.21% on a volume of 9.53 million shares.