Linda A. Lacewell, superintendent of New York’s Department of Financial Services (DFS), has announced that AIG will pay a $12 million penalty to New York state for New York Insurance Law violations related to its subsidiary, American General Life Insurance Co. (AGL), and that company’s pension risk transfer (PRT) business.
A DFS investigation found that from January 1, 2014, to June 17, 2019, AGL entered into four large-scale PRT deals and bid on several others. In addition, during this time period, several of AGL’s PRT employees were based out of New York and New Jersey.
According to the consent order filed by the DFS, Section 1102 of the insurance law prohibits any person, firm, association, corporation or joint-stock company from doing any insurance business in New York unless it is appropriately licensed pursuant to the insurance law or exempted from licensing by the insurance law. In addition, an unauthorized insurer may not make telephone calls, provide access to web portals (except in limited circumstances) or engage in any other manner of communication with any person in New York from outside New York, other than by mail, including email. Also, an unauthorized life insurer may not solicit, negotiate or sell group annuity contracts (GACs) through in-person meetings, telephone calls, mail, email, access to web portals or any other form of communication from a location in New York.
As part of its agreement with DFS, AIG will transfer the handling of transactions from AGL to its New York-based subsidiary, The United States Life Insurance Co. in the City of New York.
An AIG spokesperson told PLANSPONSOR, “We are pleased to have resolved this matter with the New York State Department of Financial Services. We have been working closely with our regulator throughout this process and are taking all necessary steps to ensure alignment with their industry-wide guidance. 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.”
In September 2019, after learning that unauthorized life insurers and their representatives were operating in the PRT market, Lacewell issued a circular letter to all life insurers and insurance producers warning them of their obligations under the insurance law and putting them on notice to fix any violations.
The AIG penalty is the second enforcement action the department has taken. In April, Lacewell announced that Athene Holding Ltd. would pay a $45 million penalty to New York state for violations related to its subsidiary, Athene Annuity & Life Co., and its pension risk transfer business.
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