HARTFORD, Conn. (Legal Newsline) - Connecticut Attorney General George Jepsen announced on Monday that his office has reached a $4.25 million settlement with two reinsurance brokers that allegedly inflated insurance and reinsurance costs nationwide.
Guy Carpenter & Company and Excess Reinsurance Company allegedly orchestrated a series of conspiracies in the reinsurance industry that illegally inflated both insurance and reinsurance costs.
The antitrust lawsuit against the companies was originally filed in October 2007 and was the first of its kind brought by an antitrust enforcement agency in the reinsurance industry. The suit had previously resulted in a $1.3 million settlement with The Hartford Financial Services Group in October 2009.
The State sued Guy Carpenter in 2007 for allegedly orchestrating a series of conspiracies with dozens of reinsurers, including Excess Reinsurance, in which Guy Carpenter was a part owner, illegally inflating costs for insurance companies and consumers nationwide over several decades.
The suit alleged that Guy Carpenter created select groups of reinsurers, which it called "facilities," and funneled lucrative reinsurance business to them for commissions and other benefits.
The reinsurers agreed not to compete against the prices or terms set by Guy Carpenter for the business, the suit says. This created a closed market that Guy Carpenter said was "insulated from competition" or any market forces, the suit says.
The complaint further alleged that the facilities were used to provide reinsurance to Guy Carpenter's smallest clients. Guy Carpenter never disclosed its relationship with the other companies or that it was involved in setting the prices and terms for reinsurance contracts, it is alleged.
Under terms of the agreement, Guy Carpenter must operate significant nationwide business reforms to ensure its clients receive the best rates and terms for insurance. The company is also required to enhance its disclosure policy and add a formalized system for obtaining competitive quotes.
"Like the lawsuit, this settlement is ground-breaking in that it requires Guy Carpenter and a number of reinsurers to change the way they conduct business - not just in Connecticut, but on a nationwide basis," 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."
Terms for the settlement will remain in effect for five years.
"Guy Carpenter has chosen to make significant changes to the way it does business," Jepsen said. "These changes will not only benefit its clients, but the reinsurance industry in general."
Both companies denied any wrongdoing in agreeing to the settlement.