New York State Fines Pacific Life for PRT Violations
The company was penalized for violating state law by conducting an unlicensed insurance business.
The New York State Department of Financial Services (DFS) has assessed a $3 million penalty against Pacific Life Insurance Co. (PLIC) for conducting insurance business in New York without a license.
The penalty was ordered in connection with the company’s pension risk transfer (PRT) business. Pacific Life was served with a consent order from Acting New York State DFS Superintendent Adrienne Harris.
“This type of unlicensed insurance activity puts the hard-earned retirement dollars of New Yorkers at risk,” she said. “The department remains committed to safeguarding the retirement assets of New Yorkers and supporting the financial stability of individuals and families, which is even more critical today as we work to revive New York’s economy amid the ongoing pandemic.”
New York state investigations into PLIC actions found that, in 2016 and 2019, the company bid on and won two large transactions with a New York-based sponsor, in violation of state insurance laws.
“The investigation concluded that PLIC had done insurance business in New York without a New York license in connection with its pension risk transfer business,” the consent order states. “PLIC PRT representatives had exchanged hundreds of email communications and other contacts with businesses (including some located in New York) and communicated with New York individuals in violation of the insurance law.”
This enforcement action is the third penalty from DFS against unlicensed insurance businesses that have solicited and engaged in violations connected to PRT businesses.
In April 2020, New York state penalized Athene Holding Ltd. with a $45 million fine for New York insurance law violations in connection to subsidiary Athene Annuity & Life Co. and its PRT business. AIG was punished with $12 million in fines for violations related to its subsidiary, American General Life Insurance Co. (AGL), and that company’s PRT business early last year.
As part of the agreement with DFS, PLIC will transfer the handling of transactions to PLIC’s New York subsidiary, Pacific Life & Annuity Co.
New York state insurance law Section 1102 prohibits operating an insurance business unless it is appropriately licensed.
“Certain acts in New York, effected by mail from outside New York or otherwise, by any person or entity, constitute doing an insurance business in New York,” the consent order states. “Such acts include making, or proposing to make, as insurer, any insurance contract, including either issuance or delivery of a policy or contract of insurance to a resident of New York or to any firm, association, or corporation authorized to do business in New York, or solicitation of applications for any such policies or contracts; in addition to collecting any premium, membership fee, assessment or other consideration for any policy or contract of insurance.”
PLIC says Pacific Life “has taken the necessary steps to resolve the issue with the DFS and has implemented necessary changes to ensure proper pension risk transfer business practices in New York moving forward.”