Marsh & McLennan's new agreement with New York authorities allowing it to receive some contingent commissions for managing general agent activity should be a mild positive for the firm, according to an investment bank analysis.
The arrangement between MMC, New York Attorney General Eliot Spitzer and Insurance Superintendent Howard Mills modifies a settlement reached last year in which MMC's Marsh brokerage arm agreed to forgo commercial insurance contingent commissions.
Authorities said the contingent payments from insurers had been used as kickbacks to reward Marsh and other brokers for steering clients and rigging bids.
Bear Stearns property-casualty analyst David Small said the effect would be mild, "as the amendment only affects a minor portion of MMC's business, which we suspect to be specifically Marsh's affinity group services and employee benefits businesses, as well as potentially its private client business."
Mr. Small said that if the other major brokerages receive, as likely, a similar reprieve from their comparable settlements with state regulators, "we believe this development could be negative for smaller players competing for MGA business against the Big Three."
The modified agreement permits Marsh to accept compensation when it has been named as the agent for a specific insurance company and places a line of business only with that insurer, according to the filing with the U.S. Securities and Exchange Commission.
Mr. Small said that since Marsh does not separate figures for the divisions he believes to be affected, the potential bottom line impact can only be roughly estimated, which he puts at a positive figure between $2.7 million and $4.6 million annually.
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