Tallahassee, FL – Florida Insurance Commissioner Kevin McCarty today announced that a settlement agreement between the American International Group, Inc. (AIG) and its affiliates with all 50 states and the District of Columbia has become fully effective. The settlement is a result of AIG misreporting $2.12 billion of workers’ compensation premium as other lines of insurance. As part of the settlement agreement, AIG agreed to pay a national penalty of $100 million, and $46.5 million in additional premium taxes and assessments.
The Office of Insurance Regulation (Office) will receive $5.6 million in fines and penalties with an additional $8.7 million split between the Department of Financial Services (DFS) Division of Workers’ Compensation, Department of Revenue (DOR) and the Florida Workers’ Compensation Insurance Guaranty Association (FWCIGA).
“AIG systematically underreported workers’ compensation insurance premium by putting this premium into the general liability or commercial automobile liability categories,” stated Commissioner McCarty. “The practical effect of this misreporting was to report premium in lines of business with lower residual market obligations or premium tax rates and assessments. I am pleased by the collaborative multi-state investigative effort that will yield millions of dollars in unpaid taxes owed to the states.”
The lead states issued their multi-state examination report in December 2010 and entered into a related regulatory settlement agreement. The agreement was subject to several conditions, all of which have now been resolved. One of those was a $450 million residual market settlement that was approved by the U.S. District Court in February 2012. The remaining open condition, a settlement with insurance guaranty associations, was satisfied on May 30, 2012 when a $25 million settlement agreement was signed.
Florida was one of the lead states in this multistate examination along with Delaware, Indiana, Massachusetts, Minnesota, New York, Pennsylvania, and Rhode Island. As part of the agreement, AIG entered into a compliance plan concerning the financial reporting of its workers’ compensation premium, and going forward agreed to be monitored and subject to a follow-up examination by the lead states in two years.