PROVIDENCE, R.I., Apr 06, 2009 (A. M. Best via COMTEX) -- State regulators who have been investigating workers' compensation premiums reported by American International Group Inc. hope to have a settlement with the insurer by June.

 

A multistate examination, conducted in cooperation with a National Association of Insurance Commissioners working group, is looking into allegations AIG (NYSE: AIG) under-reported premiums in an investigation with roots back to 2006, said Beth Dwyer, general counsel for the Rhode Island Division of Insurance Regulation. At issue are workers' comp premiums reported by AIG's Domestic Brokerage Group from 1985 to 1996 and whether risks were written at unapproved rates.

The investigation stems from a 2006 agreement between AIG and New York regulators to resolve litigation related to accounting, financial reporting and insurance brokerage practices, as well as claims related to workers' compensation premium taxes (BestWire, Feb. 9, 2006). As other states had issues with AIG, they began their own inquiries, Dwyer said.

"That agreement is only between New York and AIG," she said. "What we would probably do is have our own agreement."

Along with Rhode Island, which has taken a lead on the inquiry, Delaware, Iowa, Massachusetts, Minnesota, New Jersey and Pennsylvania are in the forefront, Dwyer said. However, any settlement would affect all 50 states, plus the District of Columbia and Guam, she said.

AIG paid $1.64 billion to state and federal authorities as part of the 2006 agreement. Dwyer said it is uncertain what components any new settlement would include, particularly given AIG's current status.

"The position of the company has significantly changed in the past 12 months and that has certainly come into consideration," she said.

AIG has long been ready to ink a settlement and is optimistic an agreement can be reached soon, spokeswoman Christina Pretto said.

"In 2006, we began to work with the NAIC, the states, and the pool to complete the execution of the settlement. The [residual market] pool, which consists of the other carriers of workers? compensation insurance, opted to pursue litigation over their share of the settlement, and we have in turn countersued the pool," Pretto said in a statement.

The NAIC got involved through its Market Analysis Working Group in January 2008. In a statement, NAIC spokesman Scott Holeman said, "The NAIC provides administrative and logistical support to our members in their collaborative action examinations. Company specific inquires should be directed to the states involved." He declined further comment.

Most AIG insurance companies currently have a Best's Financial Strength Rating of A (Excellent) with a negative outlook.

Shares of AIG were trading at $1.10 on April 6, down 3.51% from the previous close.

(By Sean P. Carr, senior associate editor, BestWeek: Sean.Carr@ambest.com)

Copyright (C) 2009 by A. M. Best Company, Inc.