Zurich Financial Services Group has reached a $153 million settlement with the attorneys general of New York, Connecticut and Illinois to settle charges relating to bid-rigging an account steering charges initiated by New York authorities.
In addition, Zurich has reached a parallel settlement with the New York insurance department.
Today’s settlement is in addition to the $171 million multi-state settlement Zurich announced last week.
Today’s two agreements, which are collectively known as the “Three-State Agreement,” relate to industry-wide investigations into broker compensation, insurance placement practices and “non-traditional” products. None of the Zurich parties to the agreement admit to any violation of U.S. federal or state laws as part of the settlement.
Specifically, the “Three-State Agreement” calls for payments of approximately $88 million in restitution to excess casualty policyholders and $65 million in fines; requires the implementation of new producer compensation disclosure and compliance regimes; prohibits Zurich from paying contingent commissions on excess casualty business in the US through 2008; establishes a mechanism whereby Zurich would stop paying contingent commissions on other lines of business if 65% of the U.S. market for a particular line of business is not paying such commissions; and requires additional reporting obligations on reinsurance transactions.
Last week, Zurich announced settlement agreements relating to broker compensation and insurance placement practices with a group of state attorneys general and state insurance departments that has since grown to 10 attorneys general and three departments of insurance, which other authorities may join.
Together with today’s deal, the total cost to Zurich will be approximately $325 million, which will be booked in the first quarter of 2006, plus attorneys’ fees and payments to class action counsel in an amount to be determined by the court.
Under today’s agreements, $88 million will be paid to Zurich policyholders harmed by bid-rigging activities. In addition, Zurich will pay penalties of $39 million to New York and $13 million each to Connecticut and Illinois.
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