Reactions Magazine: Guy Carp targeted after Hartford settlement
Oct 22, 2009
Reactions Magazine published this article on October 22, 2009.
22 October 2009
The Hartford has made a $1.3m settlement with Connecticut’s attorney general, who believes that the “first-in-the-nation” settlement will help him pursue action against reinsurance broker Guy Carpenter.
US insurer The Hartford has made a $1.3m settlement with Richard Blumenthal, Connecticut’s attorney general, resolving claims that it participated in several anticompetitive schemes that illegally inflated insurance and reinsurance costs nationwide, it was announced today. Blumenthal believes that what he calls the “first-in-the-nation” settlement will help him pursue action against reinsurance broker Guy Carpenter.
The Hartford settlement stems from Blumenthal’s litigation against Guy Carpenter launched in 2007.
“The Hartford is making history by this first-in-the-nation settlement – and drawing back the cloak of secrecy on a series of illegal price-fixing conspiracies that inflated insurance costs by hundreds of millions of dollars nationwide at the expense of 170 insurance companies and their customers,” said Blumenthal.
“The Hartford is cooperating to pursue money back from conspirators who raised premiums by up to 40% for thousands of consumers in Connecticut and nationwide. The Hartford’s settlement advances our action against the ringleader, Guy Carpenter, that masterminded and orchestrated a shifty coterie of more than 20 coconspirator companies in illegal price fixing.”
Blumenthal sued Guy Carpenter in 2007, claiming it had orchestrated a series of alleged conspiracies with dozens of reinsurers that illegally inflated costs for insurance companies and consumers nationwide over decades. Blumenthal says in some cases costs were inflated by 10% to 40%.
He says the Hartford participated as a reinsurer through its subsidairy, Hart Re, in several of the alleged conspiracies beginning in 1986 until 2001. Hart Re stopped writing reinsurance in 2003.
Blumenthal says The Hartford provided critical information that has supported the action against Guy Carpenter, including evidence that has allowed Blumenthal’s office to expand the allegations against Guy Carpenter in an amended complaint filed this week.
“My office will continue to pursue Guy Carpenter in court, now armed with the cooperation and assistance of one of Guy Carpenter’s former coconspirators, The Hartford, which has courageously chosen to step up and speak out against one of the most powerful reinsurance brokers in the world,” said Blumenthal.
“Guy Carpenter enlisted The Hartford and countless other coconspirators to participate in pay-to-play schemes in which Guy Carpenter allegedly funneled lucrative business to select inner circles of reinsurers in exchange for excessive fees and other benefits from these reinsurers. Participating reinsurers agreed not to compete against the prices and terms set by Guy Carpenter in exchange for highly profitable business. Reinsurers unwilling to ‘play ball,’ as Guy Carpenter put it, were foreclosed access to potential business that they were otherwise willing to compete for and write.”
A Guy Carpenter spokesperson told Reactions in a statement: “Guy Carpenter shares the view expressed earlier today in a statement made by The Hartford: participation in these reinsurance facilities was, and is, lawful. Guy Carpenter continues to believe that the Connecticut Attorney General’s complaint is unfounded. These facilities result in improved terms and pricing of reinsurance for small- and mid-sized clients.”
Blumenthal said Guy Carpenter and the reinsurers knew that their illegal schemes increased reinsurance costs for Guy Carpenter’s own clients. He says in one example The Hartford offered to separately compete for a book of business that Guy Carpenter had determined would be placed into one of the facilities in which The Hartford was a participant, a Guy Carpenter representative told a Hartford employee that it “did not make sense to compete internally [and] push prices down further”.
Blumenthal says that The Hartford knew that, because of its higher fees and commissions, Guy Carpenter had a “sweeter deal” through that facility and “would obviously like to funnel more premium through it”, and was forced to accept the terms as a result.
Blumenthal said, “Bolstered by backroom deals, insurance industry inertia and an unregulated market, Guy Carpenter’s conspiracies continued undetected for almost 50 years. The Hartford helped Guy Carpenter create an illusion of competition, but now has helped my investigation to break apart business practices that have inflated costs for consumers by as much as 40 percent.”