ZURICH FINANCIAL REVIEWS INSURANCE FEE POLICY

Revised: 09/22/2006

ZURICH FINANCIAL REVIEWS INSURANCE FEE POLICY

LONDON, Nov 2 (Reuters) - Zurich Financial Services Group (ZURN.VX:) is reviewing its policy on controversial contingent commissions after a U.S. probe into alleged price rigging in the industry, the group's chief risk officer said on Tuesday. "We are looking at whether we use them (contingent commissions) and whether we think that they are appropriate," Wayne Fisher told an insurance conference. "My understanding is that they are not nearly as prevalent (in Europe) as in the United States."

Contingent commissions are paid to brokers by insurers for placing client business with them, but the practice has come under scrutiny after New York Attorney General Eliot Spitzer sued the world No. 1 insurance broker, Marsh & McLennan Cos. (MMC.N: Quote, Profile, Research) , last month for allegedly rigging quotes.

Fisher said Spitzer's actions showed that the insurance regulatory regime in the United States had failed in its supervision of fees.. "I think the regulatory system in the United States probably did fail in this regard," Fisher said. "I think it leads to the conclusion that we should support a lead regulator, because I think that would make them (regulators) more effective in dealing with things in a more robust and transparent way."

Large European financial groups operating across several countries have been calling on the European Commission to create a system in which they would deal with one, lead national regulatory body to help them cope with the myriad of rules across borders. TABOO

Brokers claim contingent commissions have been an accepted part of the broking industry for decades. But paying and accepting them has become increasingly taboo as clients' hostility has grown after Spitzer's probe.

The world's three biggest brokerage firms -- Marsh, Aon Corp (AOC.N:) and Willis Group Holdings (WSH.N:) -- have all said they will abandon contingent commissions. Zurich, the world's number two insurer of large corporate clients, is cooperating with Spitzer's probe and has submitted documents at his request. The group said last month it had not so far been accused of any wrongdoing.

Spitzer's official document containing the complaint against Marsh & McLennan features Zurich along with other leading insurers, such as Hartford Financial Services Group (HIG.N:) , American International Group (AIG.N:) , Bermuda-based ACE Ltd (ACE.N:) , and a unit of Munich Re (MUVGn.DE:) .

Spitzer's complaint sketched how Marsh & McLellan tried to steer an insurance contract to Zurich in north America as it was seeking a so-called contingent commission deal with the Swiss-based group, though it added that an agreement with Zurich did not materialise.

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