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.
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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.
Legal & General America said in a response that the consent order applies only to William Penn, not to any other companies in the Legal & General group.
“Legal & General takes its regulatory obligations and relationships very seriously,” the company said.
Group executives cooperated with the New York regulator in relation to the consent order, Legal & General said.
“We are pleased to conclude this matter and to move forward with an improved relationship with the regulator,” Legal & General said.
Legal & General has put new processes in place to make sure that the same issue does not arise in the future, and there will be increased and more active group oversight, the company added.
— Read Let N.Y. Life Insurers Live: Groups to Vullo on ThinkAdvisor.