New York State Fines Life Insurer Over Reinsurance Arrangement

The New York State Department of Financial Services has imposed a $6.3 million fine on a life insurer, over allegations that the insurer used improper reinsurance transactions involving an affiliate to minimize term life reserves.

The department imposed the fine on William Penn Life Insurance Company, a unit of Legal & General America, which is a U.S. unit of Legal & General Group PLC.

(Related: Life Settlement Investors Head to New York)

The department said earlier this month that, from 2014 through this year, William Penn used reinsurance from a reinsurer that then passed on term life risk to William Penn’s parent, Legal & General Assurance Society.

William Penn did not get New York department approval for the arrangement, and William Penn reported the reinsurance arrangement in a way that made its financial statements inaccurate, the department said.

Maria Vullo, New York state’s financial services superintendent, said in a statement that the department must verify the fairness of an insurer’s financial transactions with affiliates.

The New York department “will not permit insurers to engage in secret reinsurance transactions with affiliates for the purpose of evading New York’s reserve standards,” Vullo said in the statement.