Charges by the Connecticut attorney general that reinsurancebroker Guy Carpenter engaged in price fixing for 50 years make nosense given the structure of the deals in question, according tothe insurance industry's chief spokesman.

The argument against allegations in an antitrust lawsuit filedMonday in State Superior Court in Hartford, Conn., by AttorneyGeneral Richard Blumenthal was made by Robert P. Hartwig, presidentof the Insurance Information Institute.

Mr. Hartwig questioned the concept behind an antitrust casestating that, "Guy Carpenter does not have any monopoly power--farfrom it. Antitrust implies that you basically exert pricing powerover the market."

He said the allegation "that hundreds of millions of dollarswere overpaid over the span of half-a-century, is astonishing,incredulous. Because no insurer could be systematically overchargedand disadvantaged in the market for generations...It's hard tobelieve--your customers would have left you back in the 1960s."

Mr. Blumenthal in a statement Monday charged that Guy Carpenter,a subsidiary of New York-based Marsh & McLennan Companies andthe world's largest reinsurance brokerage, is being sued "foranticompetitive practices that illegally inflated insurance costs"for insurers and consumers nationwide.

The complaint charged that a conspiracy went on for about 50years, exploiting a group of some 170 insurers by withholding"critical information and leading them to believe that GuyCarpenter was acting in their best interests."

The lawsuit also names Excess Reinsurance Company, which,according to the attorney general, Guy Carpenter "funneled businessto, despite its ownership interest in the company."

Excess Re's counsel, Jeremy D. Frey, a partner with the law firmof Pepper Hamilton LLP in Philadelphia, told National Underwriterthat the carrier was demutualized more than 10 years ago, meaningthat "the policyholders became shareholders. Roughly 91 percent ofthe stock is held by insurance companies."

Guy Carpenter said the attorney general's action is "based on afundamental misunderstanding of reinsurance facilities that havebeen in operation for the benefit of small- and mid-sized clientsfor as long as 50 years."

The reinsurer added that, "As many of our clients have confirmedduring this investigation, these facilities result in improvedavailability and terms of reinsurance, and ultimately benefitinsurance buyers. Simply put, there is no basis for the attorneygeneral's lawsuit, and we intend to defend ourselvesvigorously."

Mr. Hartwig said the small companies that use reinsurers "bundleup their reinsurance needs, and the idea is that they get a betterdeal from the reinsurers."

A small reinsurer with a thin balance sheet, he said, "might bebetter buying larger amounts of reinsurance in concert withothers--similar to a purchasing group or co-op. So there's amutuality of interest here among these small and mediuminsurers."

"Are they alleging the insurers ripped-off themselves? I don'tunderstand it," he said.

He added that "to my knowledge, these small and medium insurerswere not banging down the attorney general's door for thisaction--so I don't understand the basis of this."

Mr. Hartwig predicted that "you'll see Guy Carpenter vigorouslydefending themselves," noting that the companies in question willmost likely say "they are providing a benefit to these smallcompanies, which have been successful in a highly competitiveenvironment."

Excess Re, in a statement issued yesterday, said the company'sboard of directors is determined to defend the firm aggressivelyand, "The company is confident that the allegations against Excessare without merit."

Mr. Blumenthal charged that Guy Carpenter served as a"ringleader in choreographing the reinsurance market to fix prices,stifle competitors and collect excessive profits at the expense ofan entire industry."

Mr. Hartwig responded that "to allege that 170 small andmedium-sized reinsurers were somehow corralled by Guy Carpenter forhalf a century and were basically forced to overpay hundreds ofmillions of dollars, and have that lead to buyers of insurerspaying up to 40 percent more on their policy, is beyondbelief."

He said this suggests that the insurers were able to, "for halfa century, charge far more than their competitors, pass that costalong to policyholders, and yet somehow stay in business in a verycompetitive industry. That seems hard to believe."

The reinsurance brokerage market, he said, "is very competitive,with other major brokers such as Aon Re, Benfield, Willis Re, aswell as the direct reinsurance market. I can tell you, reinsurerscompete very heavily for exactly this type of risk."