In addition, ZAIC and Zurich Holding and its subsidiaries and affiliates authorized to transact insurance business in New York, reached a parallel settlement with the Superintendent of Insurance of the State of New York, Zurich said in its announcement. These two agreements are collectively known as the “Three-State Agreement.”
According to the announcement, the “Three-State Agreement”:
- calls for payments of approximately $88 million in restitution to excess casualty policyholders and $65 million in fines;
- requires the implementation of new disclosure and compliance regimes;
- prohibits Zurich from paying contingent commissions on excess casualty business in the U.S. through 2008;
- establishes a mechanism whereby Zurich would stop paying contingent commissions on other lines of business if 65% of the U.S. market for a particular line of business is not paying such commissions; and
- requires additional reporting obligations on reinsurance transactions.
Together with settlement agreements last week relating to broker compensation and insurance placement practices with a group of state attorneys general and state insurance departments, the total cost to Zurich will be approximately $325 million plus attorneys’ fees and payments to class action counsel in an amount to be determined by the court. The settlements last week have since grown to include 10 attorneys general and three departments of insurance, and other authorities may join.
In 2004, two Zurich executives who had been suspended by the company pled guilty to bid-rigging charges (See Two Zurich Execs Plead Guilty to Bid-Rigging). Several settlements of similar charges have been reached since New York Attorney General Eliot Spitzer began his sweeping probe into insurance company practices, including and $850 million settlement by Marsh & McLennan Companies (See MMC Settles ‘Shameful’ Bid-Rigging Case).
More information about Zurich’s recent settlement and the “Three-State Agreement” can be accessed here . None of the Zurich parties to the “Three-State Agreement” admit to any violation of U.S. or state laws.