Penalty relates to allegations of false reporting, bid-rigging and improper commission practices

American International Group (AIG) has settled with the Pennsylvania Insurance Department for $13.5m over bid-rigging and false financial information allegations.

The payments relate to the Department's investigation into financial misreporting involving AIG’s alleged false reinsurance deal with General Re Corp.

The agreement requires AIG to implement new compliance measures to ensure accurate reporting and increase the transparency of commission payments to agents and brokers.

The settlement calls for total payments of approximately $13.5m, of which approximately $4.4m has already been paid.

Under the settlement agreement, AIG neither admits nor denies the allegations made by the Department.

Acting Insurance Commissioner Joel Ario, said: "Our ability to fairly regulate the business of insurance requires that we must be able to rely upon the truthfulness of financial reports filed by companies doing business here.

"AIG is paying the largest penalty ever to the Insurance Department to resolve violations of our insurance laws. This reflects the seriousness of the violations and the fact that Pennsylvania is the primary regulator of AIG commercial property-casualty insurance companies."

In February, a former AIG executive and four former Gen Re executives were found guilty in federal court for their part in a transaction related to the financial misreporting that is the subject of the Insurance Department's actions. In addition to the false reporting, the department's investigation of AIG focused on improper activity relating to their bid-rigging and commission practices. The department is also currently working with other states to conduct a comprehensive examination of a third area of AIG's misconduct related to the under-reporting of workers' compensation premiums.