Superintendent of Financial Services Linda A. Lacewell announced today 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 Company (AGL) and that company’s pension risk transfer (PRT) business. A New York State Department of Financial Services (DFS) investigation uncovered that AGL solicited and did insurance business in New York without a license.

“A DFS license offers consumers peace of mind through the requirement of compliance with New York laws and regulations, helping to safeguard assets,” said Superintendent Lacewell. “The Department will continue to vigorously enforce the law to protect retirement assets of New Yorkers during a vulnerable economy due to the ongoing global pandemic.”

This penalty is the second such action that the Department has taken in its enforcement actions against unlicensed insurance business in the PRT industry.

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. 

A PRT transaction typically involves a plan sponsor, usually an employer offering pension plan protection to its employees, who transfers some or all of the assets and liabilities of a defined benefit pension plan to a life insurance company which then issues a group annuity contract (GAC) obligating itself to make benefit payments to either the plan sponsor or the plan participants.

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 Company in the City of New York.

In September of 2019, after learning that unauthorized life insurers and their representatives were operating in the PRT market, Superintendent 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.

DFS continues to actively investigate other potential violations in the PRT market and to that end is working with AIG and other insurance companies in that market to bring the entire New York industry into compliance with New York law.

Read a copy of the consent order on the DFS website.

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