August 24, 2006 by Canadian Underwriter
Under a new agreement made with New York Attorney General Eliot Spitzer and New York Superintendent of Insurance Howard Mills, broker Marsh Inc. is legally viable to accept contingent commissions on arrangements where it serves as either the managing general agent or underwriting manager.
Marsh documented this new deal in a recent Securities and Exchange Commission filing, according to the broker.
In January 2005, issues regarding contingent commissions plagued Marsh and parent company Marsh & McLennan Cos. Inc. At this time, Marsh just was in the process of settling bid rigging charges by both paying a US$850 million client restitution fee and agreeing to eradicate the collection of contingent commissions.
However, this settlement was amended on August 17 under new terms that allow Marsh to act, and therefore collect fees owed, as a managing general agent or underwriting manager. Marsh can serve this function when an insurer appoints the broker to represent them as manager of the insurers new book of business.
Marsh & McLennan Cos. says as a managing general agent placing business for their insurer client, they are able to engage in the profit-sharing agenda insurers enjoy.
Profit-sharing arrangements are a common way that managing general agents are compensated for the work they do on behalf of their insurer client.
Aon Corp. and Willis Group Holdings Ltd., companies that also faced and settled bid rigging accusations in 2005 under Spitzer’s fire, say they also hope to reach agreements that will allow them to legally accept contingent commissions.