American International Group (AIG), the multinational finance and insurance corporation, owes the state of New York $12 million in penalties for insurance law violations stemming from its pension risk transfer (PRT) business.

Linda A. Lacewell, Superintendent of New York’s Department of Financial Services (DFS), announced the penalty on Monday. She said an investigation from her department revealed that a subsidiary of AIG 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,” Lacewell said in a statement. “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.”

In a typical PRT transaction, a plan sponsor like an employer offers pension plan protection to employees. Those employees transfer the assets and liabilities from a defined benefit pension plan to a life insurer, who then must make payments to the plan’s sponsor or participants.

From 2014 to 2019, Lacewell says AIG’s subsidiary entered into four large-scale PRT deals and bid on several others. Their agents were also working out of New York, which would require a license from DFS.

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