New York Ends Probe of AIG Unit

New York Ends Probe of AIG Unit

By Daniel Hays

NU Online News Service, Oct. 10, 4 :15 p.m. EDT?An investigation of an American International Group subsidiary concerning a questionable charge for terrorism protection has been concluded without a finding of illegality, the New York Insurance regulator said today

In July, the New York Insurance Department had issued a statement that it later backtracked from. The original statement said that AIG's New Hampshire Insurance Company, as a result of an investigation, had returned $500,000 in "illegal" premium charges for terrorism protection. A spokesman for AIG said the refund was "voluntary" and occurred prior to any investigation.

Some 600 homeowners received a refund, which Insurance Superintendent Gregory V. Serio today said "is going to stick." But Mr. Serio also said today that "it's not clear whether they [New Hampshire] were or were not violating any law." The legal situation regarding application of the Terrorism Risk Insurance Act was "clear as mud," he said.

The superintendent said the department's legal staff had numerous meetings with AIG attorneys and "I think there was a legitimate difference of opinion between the regulator and the company about this."

Mr. Serio said the terrorism charges that were at issue involved one-to-four unit dwellings that were generating income where an owner occupied one of the living units in the building.

TRIA, he said applied to commercial buildings. But "if the owner occupies a unit that may be considered exempt from TRIA," he said.

In a four-unit building, he explained, the terrorism protection charge would only apply to 75 percent of the risk on the building.

Mr. Serio said after a homeowner's complaint led to an investigation and immediate refunds by the company, there was "something up front in the way of an immediate satisfactory resolution."

However, he said, the case raised a "question as to how were we to enforce this going forward. We went back to review how the Treasury guidance and regulations apply to the program New Hampshire was writing."

As a result he said "AIG will supply a notice to insureds to certify that they live in owner-occupied units and a form will be supplied."

Mr. Serio said the term "illegal" had been used in the original department announcement concerning New Hampshire's refund because of "confusion" over the regulations.

AIG in the past had not commented on the case. A spokesperson today had no initial reaction, but said there would be one later.

Mr. Serio said that he expected to put out some form of circular letter to clarify the issues involved.