State Settlements With Reinsurance Firms

Top $4.25 Million

HARTFORD (AP) — Connecticut’s attorney general announced a settlement with two insurance companies January 31 over accusations they conspired to inflate insurance and reinsurance costs.

Attorney General George Jepsen announced a $4.25 million settlement with Guy Carpenter & Co. LLC and Excess Reinsurance Co., ending the case that began in October 2007.

In addition, Guy Carpenter will improve disclosures and draw up a system for obtaining competitive quotes to make sure clients receive the best rates and terms for insurance, Mr Jepsen said.

“As a result of the business reforms that Guy Carpenter has agreed to, the market for reinsurance will be more transparent, more competitive and, ultimately, may lead to lower prices for insurance,” he said.

Guy Carpenter said in a statement that its actions enhanced competition by offering clients the best available terms for reinsurance among available options.

It says it settled to avoid costlier legal bills. Guy Carpenter said it and 11 participating reinsurers will share the $4.25 million.

Excess Reinsurance, now in business as KnightBrook Insurance Co., did not respond to a call or e-mail seeking comment from the AP.

Insurance companies purchase reinsurance to cover their exposure to policy claims.

The state sued Guy Carpenter in 2007, accusing it of orchestrating conspiracies with dozens of reinsurers, including Excess Reinsurance, that Guy Carpenter partly owned, illegally inflating costs for insurance companies and consumers nationwide over several decades.

Guy Carpenter was accused of creating select groups of reinsurers and funneling lucrative reinsurance business to coconspirators for undisclosed commissions and other benefits. The reinsurers in the groups agreed to not compete against the prices or terms set by Guy Carpenter for the business, the state said.

Mr Jepsen said the practice created a closed market that insulated companies from competition or other market factors. The state’s investigation showed the practice pushed up costs by as much as 10 percent to 40 percent.

The attorney general said Guy Carpenter has agreed that before placing reinsurance on behalf of clients, it will disclose whether any direct or indirect ownership interest in a reinsurance company and will disclose in writing all commissions, fees, or other compensation it expects.