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New York State Imposes 'Unauthorized' Insurer Penalty on AIG

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New York state regulators have imposed a $12 million fine on a large financial services company in connection with allegations that the company used the wrong subsidiary to handle a pension risk transfer deal.

The New York State Department of Financial Services fined American General Life Insurance Company and its parent, American International Group Inc. (AIG).

New York regulators said Monday that AIG violated state law by having subsidiary American General Life employees, who not authorized to sell group annuities in New York state, handle certain communications. These included communicating with pension risk transfer (PRT) prospects and PRT customers and with group annuity plan participants in New York state.

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AIG has another subsidiary, The United States Life Insurance Company in the City of New York, that is authorized to do business in New York state. AIG has agreed, through a consent agreement with the New York department, to transfer the handling of transactions related to pension risk transfers to U.S. Life.

New York officials are not alleging that AIG or American General violated other rules, or that American General Life wrote the group annuities used in the pension risk transfer arrangements.

Under New York state law, “an unauthorized insurer may not make telephone calls, provide access to web portals (save for limited circumstances …), or engage in any other manner of communication with any person in New York from outside New York, other than by mail,” according to the consent order. “In addition, an unauthorized life insurer may not solicit, negotiate, or sell group annuity contracts (“GACs”) through in-person meetings, telephone calls, mail, emails, access to web portals, or any other form of communication from a location in New York.”

The New York department imposed a $45 million penalty on another insurer, Athene Annuity and Life Company, in connection with similar allegations in April 2020.

AIG representatives said in a written comment on the New York state consent agreement that they are pleased to have resolved the matter.

“We have been working closely with our regulator throughout this process and are taking all necessary steps to ensure alignment with their industrywide guidance,” AIG representatives said.

“There has been no disruption for our pension risk transfer corporate clients or for their New York-based retirement plan participants who will continue to receive their benefit payments as usual. We remain fully committed to serving as a strategic partner in this important market,” they said.

— Read New York Imposes $19.75 Million in Fines in Pension Risk Transfer Caseon ThinkAdvisor.

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