Second Rating Firm Sets Watch On Aon

Fitch said that "As the second largest player in the insurance brokerage business, Fitch is concerned that Aon could be affected by the investigations.

They referred to probes by New York, California, Connecticut and Georgia and a civil action by New York Attorney General Eliot Spitzer, which accuses Marsh Inc. brokerage of price-fixing and bid rigging in collusion with major insurers.

If Aon is damaged by the investigations, the company could be susceptible to a material decline in its franchise value and in near-term operating performance due to margin compression, diminished financial flexibility, and lost clients, Fitch said. "Additionally, legal fines could be a factor, though Fitch believes this risk is secondary at this point in time," the firm said.

Future developments, including the filing of charges "would heighten Fitch's concerns," the rating agency added.

Yesterday, Standard & Poor's Rating Services lowered its counterparty credit rating on the Chicago-based broker and placed it on credit watch with negative implications.

A call to an Aon spokesman for comment was not returned.

Commenting on events, Melissa Gannon, vice president with Weiss Ratings, Inc., the insurance rating agency based in Palm Beach Gardens, Fla., said she hoped that the by-product of this scandal would be more transparency within the industry, but she remained skeptical of that happening.

"Our position has been that the industry is riddled with conflict of interests," she said. "We have always advocated full disclosure and end to the special relationships. We need more disclosure across the board."

Weiss does not rate insurance brokerage firms, but when asked if she thought if the egregious practices at Marsh were being practiced elsewhere, she said, "I would suspect that there is more than one firm where this has happened."