HARRISBURG, Pa.—American International Group Inc. must pay state regulators $146.5 million by the end of June to settle 2006 allegations that its insurers underreported workers compensation premiums over several decades.

The $146.5 million “global resolution” includes the $100 million in penalties and $46.5 million in additional premium taxes and assessments that New York-based AIG will pay to all 50 states and the District of Columbia, Pennsylvania Insurance Commissioner Michael Consedine announced Thursday.

Pennsylvania is among several lead states that worked out a settlement in 2010 on behalf of all the states.

“This culminates an effort among all of the nation's state insurance regulators to investigate and resolve complex issues occurring over an extensive period of time,” the commissioner said in a statement.

The commissioner called the settlement a “final agreement” which became “fully effective this week.”

The settlement stems from the 2006 allegations that surfaced when then-New York Attorney General Eliot Spitzer accused AIG of underreporting workers comp premiums over several decades to avoid paying its fair share of state residual market assessments.

After those allegations, AIG's workers comp insurance competitors sued, alleging that they paid states more than their fair share of residual market assessments because AIG was assigned an improperly small share of high-risk workers comp policies because of the underreporting.

Reports stated that AIG's payout of the $146 million to the states depended on the insurer first resolving the litigation with its rivals.

This year, a federal judge in Chicago formally approved a $450 million settlement of a class action suit brought against AIG by its competitors.

“The NAIC multistate workers compensation examination focused on allegations of conduct taking place between 1975 and 1996, the same period that was the subject of the 2006 regulatory settlement between AIG and the State of New York,” an AIG spokesman said in a statement. “We are pleased that if this settlement becomes final, we will have resolved all remaining regulatory issues related to AIG’s workers compensation premium reporting for our stakeholders. The settlement represents AIG’s unwavering commitment to regulatory compliance and principled corporate governance.”