Ace Ltd. has agreed to pay $80 million in restitution and penalties and reform its business practices as part of a settlement with New York, Connecticut, and Illinois to resolve charges of bid-rigging and improper finite-reinsurance transactions.
“Ace has acknowledged its problems and cooperated fully in our investigation,” said New York State attorney general Eliot Spitzer, in a press release. In addition, the Bermuda-based property and casualty insurer also will adopt reforms “designed to address the problems created by the use of contingent commissions and finite reinsurance.”
According to the release from Spitzer, the company also stated that “to promote transparency and reduce the potential for conflicts of interest, Ace has supported legislation in the U.S. to eliminate contingent compensation and through this agreement pledges to continue to do so.”
Under the agreements, $40 million in restitution will be paid to Ace policyholders harmed by bid-rigging activities. The company will also pay penalties of $24 million to New York and $8 million each to Connecticut and Illinois.
Spitzer and the New York State Insurance Department announced a joint probe of misconduct in the insurance industry in the fall of 2004. So far, the investigation has resulted in settlements with six companies, guilty pleas from 20 insurance company executives and officers, and the recovery of approximately $3 billion in restitution and penalties, according to the attorney general’s statement.