MetLife to Pay NY Authorities $60 Million for Insurance Law Violations
March 31, 2014 by Michael Buck
EW YORK – MetLife Inc. will pay a $60 million fine after New York authorities found that two of its subsidiaries solicited insurance business in the state without a license and that those companies allegedly “made intentional misrepresentations” to insurance regulators, according to a statement from the New York Department of Financial Services.
The MetLife subsidiaries involved are American Life Insurance Co. and Delaware American Life Insurance Co., which MetLife acquired from American International Group in 2010. MetLife will also cooperate with the New York DFS investigation into possible insurance law violations by AIG, prior to MetLife’s acquisition of the companies. The DFS said that matter is ongoing and has not been resolved.
“Insurers have a responsibility to follow the law, play by the rules, and be honest with their regulators,” Benjamin M. Lawsky, superintendent of the New York DFS, said in a statement. “Our department will continue to aggressively investigate and pursue wrongdoing within this industry wherever we uncover it. MetLife did the right thing by stepping up to resolve this matter.”
MetLife will pay $50 million of its fine to the New York DFS, while $10 million will be paid to the Manhattan District Attorney’s Office. The Manhattan district attorney’s investigation was resolved with a deferred prosecution agreement, which it uses to hold companies accountable through fines and requirements that they will commit to policy changes, according to a written statement.
“With these agreements we have resolved the New York licensing matter and look forward to continuing to provide our multinational clients with solutions for their growing global employee benefits needs,” MetLife said in a statement.
MetLife said the agreement makes it clear that it can continue to have meetings and discussions in New York with its multinational clients. It said it looks “forward to maintaining a constructive relationship” with the DFS.
The DFS has been investigating the matter since at least last year (Best’s News Service, Nov. 1, 2013). The department alleges that Alico, while operating as a subsidiary of AIG in 2009, made intentional misrepresentations and omissions to New York insurance regulators about Alico’s activities in the state, telling regulators the company was not soliciting business in New York. The DFS alleges that Alico and “certain alien insurers” have collected approximately $900 million in premiums from multinational corporations involving contact with its New York sales representatives from 2007 to 2012.
The Manhattan District Attorney’s Office said in a statement that New York insurance law requires insurers soliciting business from within New York to be licensed. It said Alico and DelAm used Manhattan-based personnel to solicit business, while neither company was licensed in New York.
“AIG disagrees that the conduct in question violated the law,” AIG said in a statement. “Decades of industry practice and the plain language of the relevant statute make clear that a New York license is required only where a foreign insurer issues policies covering New Yorkers. Moreover, there is no allegation, and we are aware of no evidence, that anyone has been harmed by the conduct at issue.”
Delaware American Life Insurance Co. currently has a Best’s Financial Strength Rating of A (Excellent), as do rated American International Group companies, while Metropolitan Life Insurance Co. is currently rated A+ (Superior). On the afternoon of March 31, shares of MetLife Inc. (NYSE: MET) were trading at $52.80, up 0.46% from the previous close, while shares of American International Group, Inc. (NYSE: AIG) were at $50.01, up 0.26%.
(By Michael Buck, senior associate editor, BestWeek: Michael.Buck@ambest.com)