Guy Carpenter Outlines "Disclosure Doctrine"
By Mark E. Ruquet
NU Online News Service, Dec. 17, 3:28 p.m. EST?Reinsurance broker Guy Carpenter, a Marsh subsidiary, has unveiled a new disclosure policy for global treaty placements.
The London-based broker said that when it becomes the broker of record with a client, it will disclose the compensation it anticipates to receive for services, including any variations from standard rates. The firm also said it would list the brokerage for each insurance transaction on the cover note for all treaty business.
The new disclosure policy will become effective Jan. 1, 2005.
Guy Carpenter said the policy would cover treaty placements globally, representing 90 percent of the firm's revenues. The policy will be extended to include facultative placements once a worldwide review of current practices is completed.
Karen Griffiths, a spokeswoman for Guy Carpenter, said the firm hopes to have its disclosure policy for facultative placements of individual risk offerings in place by the end of the year. She noted that the policy is taking a little longer to develop because of the complicated nature of the programs.
Guy Carpenter released a general summary of its current compensation schedule, noting that it receives commissions of between 1 and 2.5 percent, and in some cases, greater than 2.5 percent on gross premium.
The company listed its compensations for excess of loss placements (10 percent of contract premium); placements made in the London market (an additional 5 percent charged by the London correspondent broker, often a Guy Carpenter broker); and a 5 percent commission, in some markets, for reinstatement premiums.
Guy Carpenter noted that it entered into "a limited number" of market service agreements involving contingent fees based on volume placements. It said all such agreements have either expired or been terminated.
The MSAs have been controversial since New York Attorney General Eliot Spitzer sued Marsh & McLennan Companies, Marsh's parent, over allegations the brokerage rigged bids and steered insurance contracts to carriers paying contingency fees.
Mr. Spitzer has said the fees were essentially kickbacks from the insurers who cooperated with the scheme to have business sent their way.
Since the suit was filed, the world's top three major insurance brokerage firms, Marsh, Aon and Willis have terminated contingency fee arrangements.
The disclosure policy follows last week's announcement by Benfield Inc., an independent reinsurance broker, that the firm will begin fully disclosing its compensation beginning Jan. 1, 2005. The policy would apply to all U.S. property-casualty coverage. It also said it would disclose to its reinsurance customers all material relationships the firm has with the customers' reinsurers.
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