AIG underpayed into workers’ compensation pools
AIG is being investigated by 50 state insurance regulators examining whether the firm violated rules governing workers’ compensation sales, Bloomberg reports.
The watchdogs may fine AIG in June, said Beth Dwyer, general counsel for the Rhode Island Insurance regulator, which is leading the investigation.
The investigation expanded last year when a 18 regulators decided that all 50 states should examine the insurer’s conduct, Dwyer said.
It concerns whether ot not AIG shortchanged the premiums used in calculating its obligations to state pools. In most states, companies that sell workers’ compensation must fund pools that serve as insurers of last resort to cover injuries at employers that pose unattractive risks.
AIG agreed in 2006 to set aside more than $300m to pay for misstating premiums to state programs between 1985 and 1996. A group made up of about 600 rivals, the National Workers Compensation Reinsurance Pool, said that AIG underpaid for 35 years and owed more than $1bn. The group sued the insurer in 2007 in federal court in Chicago.
A spokeswoman for AIG, said the insurer was working with a consultant hired by the regulators to resolve their review. The company was prepared to make payments to states under the 2006 agreement and put the funds on hold to wait for responses from regulators, she said.
“We remain optimistic that all parties will reach a resolution of this matter soon,” she said.
