AIG Unit to Pay $86.7 Million Fine

Lexington Insurance Co., a unit of American International Group Inc., will pay $86.7 million to a U.S.-based Lonsdale LLC, subsidiary of a Belgian bank, according to the Wall Street Journal. The payout reportedly was tied to a dispute over insurance on loans that were made to an investor who purchased older people's life-insurance policies.

In April, an American Arbitration Association panel ruled 2-1 in favor of Lonsdale. According to reports, Lexington didn’t follow through on an insurance contract the Belgian bank took out to cover risks of investing in life settlements.

When Lonsdale’s borrowers defaulted, it attempted to recover the losses from Lexington. Lexington claimed the older people were misled into applying for the policies. But, the two arbitrators who ruled in favor of Lonsdale concluded that Lexington failed to prove the policies were originated through a prohibited act or that Lonsdale concealed any material fact, WSJ reports.