NU Online News Service, Feb. 1, 11:46 a.m. EST
Reinsurance broker Guy Carpenter will pay Connecticut $4.25 million to settle anti-trust allegations brought by the state’s attorney general, as both sides declared victory in a lawsuit going back to 2007.
Connecticut Attorney General George Jepsen announced the settlement yesterday, stating that it resolves claims that Guy Carpenter illegally inflated insurance and reinsurance costs nationally through “a series of conspiracies.”
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 it requires Guy Carpenter and a number of reinsurers to change the way they conduct business—not just in Connecticut, but on a nationwide basis,” said Mr. Jepsen in a statement. “As a result of the business reforms that Guy Carpenter has agreed to, the market for reinsurance will be more transparent, more competitive and, ultimately, may lead to lower prices for insurance.”
The settlement also includes Excess Reinsurance Company—now Knightbrook Insurance Company—which the attorney general said Guy Carpenter is a part owner in.
The attorney general alleged that going back to 2007, Guy Carpenter entered into insurance contracts with certain companies, steering those contracts to the companies in exchange for lucrative undisclosed insurance commissions “and other benefits.”
For its part, Guy Carpenter vehemently denied the allegations, saying that it reached the settlement after determining that further litigation would be more expensive.
“The attorney general had alleged that facilities offering reinsurance to more than 150 small to midsize insurance companies over decades were anti-competitive and unfair,” the firm said. “Guy Carpenter vigorously denied these claims as contrary to both the relevant facts and law. Guy Carpenter maintains that these facilities were actually pro-competitive, offering these clients the best available terms for reinsurance among the numerous options available to them. In turn, these broader and more competitive terms for reinsurance enhanced our clients’ ability to compete in the insurance marketplace.”
The firm continued, “Given our firm belief that this was and is the case, our goal always has been to ensure that the facilities remained free to operate as they previously have, in order to bring the most competitive terms to our clients. We believe the terms of this 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 any interest in the reinsurer the business is being placed with and what 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 competing companies and, when better quotes are found on the open market, inform its brokers of the findings, which will have to be taken into consideration when clients purchase reinsurance from Guy Carpenter.