Zurich settles with attorneys general

Zurich Financial Services Group recently agreed to pay US$153 million to settle investigations instigated by the attorneys general of New York, Connecticut and Illinois.
The agreement calls for Zurich to pay approximately US$88 million in restitution to excess casualty US policyholders and US$65 million in fines payable to the three states involved. Of these fines, US$39 million is allocated to New York and US$13 million is allocated to both Connecticut and Illinois.
The agreements, collectively referred to as the ‘Three-State Agreement,’ relate to industry-wide investigations into broker compensation and bid-rigging, insurance placement practices and ‘non-traditional’ finite reinsurance products.
Under the terms of the settlement Zurich also agreed to reduce the use of contingent commissions by stopping payment on excess casualty business in the US through 2008 and on other lines of business if 65% of the US market for a particular line of business is not paying such commissions.
In addition, Zurich must also implement new disclosure and compliance regimes and meet further reporting obligations on reinsurance transactions.
Under the settlement Zurich did not admit to any violation of US federal or state laws as part of the settlement.
Zurich however recently issued an apology relating to misconduct and stated that “certain of its employees violated both acceptable business practices and Zurich’s own standards of conduct by engaging in improper bidding practices.”
Together with the “Three-State Agreement”, the total cost to Zurich will be approximately US$325 million, which will be booked in the first quarter of 2006, plus attorneys’ fees and payments to class action counsel in an amount to be determined by the court.
CEO of Zurich James J. Schiro says the insurance industry is undergoing a transformation and he anticipates that these agreements will “bring greater clarity to how Zurich will move forward to serve producers and customers in this new era of transparency.”