AIG bares teeth in NY regulator lawsuit

Angered over costly legal fines, AIG is suing New York State regulatory bodies over allegations the insurer violated state law.

Insurance News

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Angered by New York State Department of Financial Services’ allegation that it solicited insurance business in the state without a license, global insurer AIG sued the DFS last week in a move to block a potential $60 million fine.

The fine was issued earlier last week by the DFS and its superintendent, Benjamin Lawsky. Lawsky alleged that two former AIG units—American Life Insurance Co (ALICO) and DelAm—did business in the state for several years before being sold to current owner MetLife.

Lawsky added that a probe into other possible violations regarding the two subsidiaries was ongoing.

In its suit against both the DFS and Lawsky, AIG is attempting to block any action on both fronts. AIG claims New York officials have threatened to seek “substantial monetary penalties” from AIG over ALICO’s activities, which violates the insurer’s rights to due process under the US Constitution.

AIG added that Lawsky’s activities represent an “unprecedented attempt” to expand the authority of a regulator.

The move comes after the insurer finished repaying the last of what became a $182.3 billion federal bailout following the 2008 financial crisis.

DFS said it would answer AIG’s claims in court. Matt Anderson, a spokesman for Lawsky, also added:

“AIG may not want to cooperate with our probe, but they are not above the law—no matter how big or powerful they may be.”

The fine against AIG is the latest in a series of crackdowns by the DFS. Earlier in March, the unit fined AXA’s US branch an unprecedented $20 million for failing to provide adequate notice it would make changes in certain of its retirement-income contracts.

New York Gov. Andrew Cuomo backed Lawsky’s actions, saying they “send a message that failing to [be clear and upfront with regulators] is simply unacceptable.”

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