NU Online News Service, Feb. 1, 11:46 a.m.EST

Reinsurance broker Guy Carpenter will pay Connecticut $4.25million to settle anti-trust allegations brought by the state’sattorney general, as both sides declared victory in a lawsuit goingback to 2007.

Connecticut Attorney General George Jepsen announced thesettlement yesterday, stating that it resolvesclaims that Guy Carpenter illegally inflated insurance andreinsurance costs nationally through “a series ofconspiracies.”

The firm, part of New York-based Marsh & McLennan Companies,neither admits nor denies any guilt under the agreement.

“Like the lawsuit, this settlement is ground-breaking in that itrequires Guy Carpenter and a number of reinsurers to change the waythey conduct business—not just in Connecticut, but on a nationwidebasis,” said Mr. Jepsen in a statement. “As a result of thebusiness reforms that Guy Carpenter has agreed to, the market forreinsurance will be more transparent, more competitive and,ultimately, may lead to lower prices for insurance.”

The settlement also includes Excess Reinsurance Company—nowKnightbrook Insurance Company—which the attorney general said GuyCarpenter is a part owner in.

The attorney general alleged that going back to 2007, GuyCarpenter entered into insurance contracts with certain companies,steering those contracts to the companies in exchange for lucrativeundisclosed insurance commissions “and other benefits.”

For its part, Guy Carpenter vehemently denied the allegations,saying that it reached the settlement after determining thatfurther litigation would be more expensive.

“The attorney general had alleged that facilities offeringreinsurance to more than 150 small to midsize insurance companiesover decades were anti-competitive and unfair,” the firm said. “GuyCarpenter vigorously denied these claims as contrary to both therelevant facts and law. Guy Carpenter maintains that thesefacilities were actually pro-competitive, offering these clientsthe best available terms for reinsurance among the numerous optionsavailable to them. In turn, these broader and more competitiveterms for reinsurance enhanced our clients’ ability to compete inthe insurance marketplace.”

The firm continued, “Given our firm belief that this was and isthe case, our goal always has been to ensure that the facilitiesremained free to operate as they previously have, in order to bringthe most competitive terms to our clients. We believe the terms ofthis settlement accomplish that goal.”

Under the agreement, which will remain in effect for five years,Guy Carpenter will disclose to its clients whether it has anyinterest in the reinsurer the business is being placed with andwhat the nature of its compensation will be.

The firm will also:

• Explain its decision for the placement.
• Obtain three competitive bids for Connecticut companies.
• Perform a nationwide sampling program of quotes from competingcompanies and, when better quotes are found on the open market,inform its brokers of the findings, which will have to be takeninto consideration when clients purchase reinsurance from GuyCarpenter.