MetLife missing annuitants case (2018)
In 2018, MetLife admitted it had never paid annuities to about 13,500 retirees from pension plan buyouts, which led to penalties from New York regulators and the SEC.
When a company transfers its pension plan to an insurer through an annuity buyout, the insurer takes on paying pensions to thousands of people it does not know, often years before they retire. The operational risk is losing track of them: an outdated address, a name change, no claim at the expected age. The MetLife case showed the perverse accounting effect of that risk: a policyholder presumed unreachable or dead allowed the matching reserve to be released, which raised earnings. It led regulators to require active searches, notably through matching against death records, before treating a liability as extinguished, a requirement akin to the one France's Eckert law sets for unclaimed life policies.
In mid-February 2018, MetLife delayed its earnings and disclosed that about 13,500 of its 600,000 group annuity recipients had not received their payments, some for 25 years; it set aside a $510 million reserve and acknowledged a material weakness in internal control. In January 2019, the New York State regulator fined it $19.75 million and required more than $189 million in retroactive payments; the SEC added a $10 million penalty in late 2019.
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