In a press release dated January 29, 2008, Texas Attorney General Greg Abbott announced the settlement of a bid-rigging investigation involving American International Group Inc. Click here to review the press release, petition and final judgment with AIG. The press release states that the agreement was spearheaded by Texas Attorney General Abbott’s Antitrust Division. AIG also issued a press release the same day which stated, “[u]nder the settlement agreements, AIG denies the allegations and does not admit liability. Nevertheless, to avoid the expense and uncertainty of protracted litigation, AIG agreed to the settlements.” Click here to read AIG’s press release.

The agreement calls for AIG to end its alleged involvement in a bid-rigging scheme created by Marsh & McLennan. AIG must also pay $12.5 million to nine states (Texas, Florida, Hawaii, Maryland, Massachusetts, Michigan, Oregon, Pennsylvania, West Virginia) and the District of Columbia. Under the settlement, Texas will receive approximately $3.7 million.

Specifically, the agreement requires “AIG to reform its business practices, including disclosing to its customers the precise amount of compensation it pays to insurance brokers.” The Attorney General’s Office reports that its investigation found that “AIG participated in deceptive insurance bid-rigging, price-fixing and other schemes in the commercial insurance market. Marsh & McLennan devised the scheme to mislead large and small companies, nonprofit organizations and public entities into believing they were receiving the most competitive commercial premiums available.”

The Attorney General’s office states that its investigation focused on AIG’s failure to disclose contingent commissions it paid to brokers, and that Marsh devised the means by which commercial policyholders were given the appearance of a legitimate competitive policy bidding process. The press release states that Marsh pre-designated certain insurers to win bids, resulting in increased rates for policyholders that were not competitive.

AIG’s press release also states that “[t]he agreement with the Texas Attorney General also settles allegations of anticompetitive conduct relating to AIG’s relationship with Allied World Assurance Company [,another surplus lines property and casualty insurer], and includes an additional settlement payment of $500,000 related thereto.”