Reinsurance Focus

We have previously reported on the class action lawsuit by members of the National Worker’s Compensation Reinsurance Pool (the “Pool”) against AIG for alleged “fraudulent underreporting of workers compensation premiums for the purpose of reducing its share of the residual workers compensation market – and consequently increasing the residual market costs of the other members of the [Pool].” The amount allegedly underreported by AIG was estimated at approximately $2.1 billion. Subject to “some minor modifications” to the class notice and settlement agreement, the district court has granted preliminarily approval to a class settlement between AIG and certain members of the Pool that intervened in the case. Factors militating in favor of settlement approval included: that the strength of plaintiffs’ case compared to the settlement offer was “within a reasonable range,” that the likely complexity, length and expense of trial weighed heavily in favor of the settlement’s fairness, and that the amount of opposition to the settlement was minimal thus far. The highlights of the settlement include A $450 million settlement award to the class, $146 million in penalties, back taxes, and assessments payable to certain states, and a reformation of AIG’s methodology for reporting workers compensation premiums. The settlement has also been approved by the insurance commissioners of all 50 states and the District of Columbia. American International Group, Inc. v. ACE INA Holdings, Inc., Case No. 07-02898 (USDC N.D. Ill. July 26, 2011).

This post written by Michael Wolgin.