American International Group will pay a total of $146.5 million to be distributed among all 50 states following a probe that sought to determine whether the insurer violated premium-reporting rules governing Workers' Compensation insurance.
The state of Pennsylvania, a lead state in the probe spearheaded by a group of several states including Delaware and Florida, says it will receive more than $16.8 million in fines and assessments as part of the settlement—a figure that includes the biggest fine levied in the agency's history, according to the state insurance department.
Pennsylvania says its share breaks down to $8.6 million in fines, $3.6 million to the state's Workers' Compensation Security Fund, and $4.6 million in premium taxes and assessments.
Rosanne Placey, spokesperson for the Pennsylvania Insurance Department, says this recent settlement announcement finalizes a settlement agreement originally reached in 2010. She notes that part of what held up the settlement was a disagreement between AIG and Liberty Mutual over a $450 million settlement AIG reached last year with other private insurers to resolve the same matter. Placey says it was ultimately agreed that the matter between Liberty Mutual and AIG should not hold up the latter's separate settlement with the states.
“State insurance regulators must be able to rely on accurate company financial data. In AIG's case, we found that the companies, which operated in a pooled arrangement, had underestimated their liabilities under intercompany policyholder guarantees,” Pennsylvania Insurance Commissioner Michael Consedine says in a statement.
As part of the settlement, AIG corrected previously filed financial reports and reallocated approximately $2.1 billion of premium from other lines of insurance to Workers' Compensation, Consedine adds.
AIG says in a statement that the probe focused on allegations of conduct taking place between 1975 and 1996, the same period that was the subject of a 2006 regulatory settlement between AIG and the state of New York.
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