Benjamin M. Lawsky, Superintendent of Financial Services, announced today that AIG will pay a $35 million penalty for Insurance Law and other violations related to its former subsidiaries ALICO and DelAm. A New York State Department of Financial Services (DFS) investigation uncovered that those subsidiaries solicited insurance business in New York without a license and made intentional misrepresentations and omissions to the Department about those activities.

Superintendent Lawsky said: “No company has a right to ignore the laws that every other insurer has to follow. This type of misconduct is unfair to its competitors and puts consumers at risk. We are pleased that AIG has decided to resolve this matter.”

ALICO, while operating as a subsidiary of AIG in 2009, made intentional misrepresentations and omissions to DFS’ predecessor agency concerning its insurance business activities in New York. For example, in July 2009, ALICO made a presentation to DFS’ predecessor agency that specifically stated, with respect to ALICO, there were: “No Insurance Operations Conducted in New York.” Furthermore, in a November 2009 letter, ALICO represented to the Department that its activities in New York were primarily “‘back office functions.”

However, DFS’ investigation uncovered that ALICO’s insurance activities in New York went well beyond engaging in “back office” functions. In fact, ALICO and DelAm were doing insurance business in New York.

In 2009, AIG sold ALICO and DelAm to MetLife – and unlicensed insurance activity continued under MetLife. In March 2014, MetLife paid a total of $60 million to DFS ($50 million) and the Manhattan District Attorney ($10 million) to resolve this misconduct related to those subsidiaries.

DFS’s investigation concluded that ALICO and certain alien insurers have collected approximately $900 million in premiums (including renewals) from multinational corporations involving contact with its New York sales representatives from 2007 to 2012. The Department’s investigation found extensive insurance activities by ALICO, DelAm, AIG, and MetLife related to that business from their respective offices in New York, including the following:

• Sales representatives solicited in New York global employee insurance on behalf of ALICO and DelAm and their subsidiaries or affiliates, as well as insurers not affiliated with either company, without any such insurer being duly licensed in New York;
• Sales representatives were engaged in direct selling in New York to multinational companies on behalf of ALICO and DelAm and their subsidiaries and affiliates as well as insurers not affiliated with either company;
• Sales representatives conducted “road shows” in New York in order to solicit and sell group insurance products of ALICO, DelAm and their subsidiaries and affiliates and other unaffiliated insurers. The sales representatives, for example, conducted a “road show” at the AIG corporate dining room at 70 Pine Street for multinational companies with operations in Brazil. The Brazil “road show” was designed to generate new sales in the amount of $25 million;
• Sales representatives had incentive compensation plans that compensated them for placing business with DelAm and the foreign operations of ALICO and its subsidiaries and affiliates and other unaffiliated insurers;

To view a copy of the consent order between DFS and AIG, please visit, link.