© 2008 The Associated Press
By MARC LEVY Associated Press Writer
HARRISBURG, Pa. – The nation’s largest insurer, American International Group Inc., will pay $9.1 million in penalties to Pennsylvania for filing false financial information, state insurance regulators said Monday.
The agreement also resolves allegations in a separate case that AIG rigged bids and requires the insurer to adopt procedures to improve the transparency of the commissions AIG pays to agents and brokers, the state Insurance Department said.
New York-based AIG said in a statement Monday that it did not acknowledge any wrongdoing in the settlement. It already has reached settlements in the matter with the federal government and other states.
It is the largest fine the state Insurance Department agency has ever imposed, and brings to $13.5 million the amount in penalties brought against AIG by the state over the last several years, agency spokeswoman Rosanne Placey said.
The Insurance Department also is taking part in a multistate investigation into AIG’s reporting of workers compensation premiums.
The fine is related to an alleged scheme to manipulate AIG’s financial statements in which the company paid General Re Corp. to take out reinsurance policies in 2000 and 2001. Federal authorities have said that propped up AIG’s stock price and inflated reserves by $500 million.
Separately, AIG and several of its subsidiaries were accused of conspiring with insurance brokers by submitting fake bids to create the illusion of a competitive bidding process in the excess casualty commercial insurance market.
Despite the appearance of a fair bidding process, the broker had already decided which insurer would receive a particular policyholder’s business, investigators said.
As part of the scheme, AIG paid the brokers “contingent commissions” which were not disclosed to policyholders and in return received other lucrative business, authorities alleged.