Zurich Suspends Employees in Insurance Broker Review

Revised: 09/22/2006

ZURICH SUSPENDS EMPLOYEES IN INSURANCE BROKER REVIEW

ZURICH, November 12 (Reuters) - Zurich Financial (ZURN.VX:) has suspended several employees after an internal review into practices with insurance brokers in the wake of an industry-wide probe led by New York Attorney General Eliot Spitzer.

The Swiss insurer's review included its business with the world's largest insurance broker, Marsh & McLennan Cos (MMC.N:) , which was sued by Spitzer for alleged bid rigging in October.

"This review process ... has led to the suspension of several employees of the Excess Casualty underwriting unit in the Specialties Business of Zurich North America Commercial," Zurich said in a statement on Friday.

Separately, German insurance giants Allianz (ALVG.DE:) and Munich Re (MUVGn.DE:) , along with specialist London-based insurers Catlin Group (CGL.L:) and Hiscox Plc (HSX.L:) , said on Friday they too were conducting internal reviews of their operations following the launch of Spitzer's probe.

A large number of leading insurers have received subpoenas in Spitzer's investigation into contingent commissions, or profit-sharing arrangements whereby insurers pay brokers to steer customers their way.

While such schemes are widespread, they are increasingly becoming taboo as Spitzer accused Marsh & McLennan of rigging prices. The broker has since scrapped the practice.

Zurich Financial has stressed it is not a defendant in the Spitzer probe, but that it was cooperating as it had received a subpoena to send documents. But its chief risk officer, Wayne Fisher, said earlier this month Zurich was looking into its policy on the contingent commissions at the heart of the investigation.

COMFORT AND DISTRESS

A spokesman for Zurich declined to say how many people had been suspended or on what grounds, but stressed that the staff involved had not been dismissed. The investigation was still continuing, he said.

Equity markets shrugged off the news, with Zurich shares ending down 0.3 percent at 178.00 Swiss francs, having outperformed the European insurance sector for most of the day.

Munich Re shares closed up 0.6 percent at 83.16 euros, while Allianz shares closed up 2.3 percent at 93.00 euros. Hiscox shares closed up 0.5 percent at 155 pence, while Catlin's closed down 0.61 percent at 369.25 pence

"It's quite comforting they say they're launching their own investigation. A bit unnerving they're suspending people on the back of it but nothing to be too distressed about," said one London-based analyst, who asked not to be named.

Zurich is due to report nine-month earnings next week. Allianz earlier reported better-than-expected profit in the first nine months, boosting its shares.

Allianz's finance chief, Helmut Perlet, said the group had not received a subpoena from Spitzer or any other U.S. insurance regulator probing alleged malpractice.

Perlet said the Allianz internal investigation would look at all aspects of its American business and was likely to be completed in a few weeks. He said it was too early to provide details of the review's findings, but said Allianz would look to extend the review to "look selectively at other markets".

Munich Re said that, at this time, it has "no reason to believe that it has engaged in any irregular activities." (Additional reporting by Simon Challis and Carmel Crimmins in London) © Reuters 2004. All Rights Reserved.

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