Attorney general takes aim at Guy Carpenter in latest lawsuit

In the latest legal action against major US financial service
industry players, Guy Carpenter & Company (GCC), one of the
world’s biggest reinsurance brokers, has found itself facing an
antitrust lawsuit filed against it by the Attorney General of
Connecticut, Richard Blumenthal. In the preamble to his 107-page
filing, he stated: “This lawsuit challenges a series of
conspiracies within the reinsurance industry, principally led by
broker Guy Carpenter & Company, LLC, to fix prices and terms on
reinsurance contracts purchased in Connecticut and throughout the
United States.”

In a statement summarising his lawsuit, Blumenthal said: “Thousands
of consumers in Connecticut and many more in most states across the
country paid premiums up to 40 percent higher, costing them
potentially hundreds of millions of dollars. We are drawing back
the cloak of secrecy on industry practices that inflated prices and
profits at the expense of 170 insurance companies and their
customers.”

In his statement, he continued that his investigation, which is
ongoing, has revealed an industry “plagued by pervasive
anti-competitive and anti-consumer” practices. “Guy Carpenter’s
schemes were enabled by a shifting coterie of more than 20
co-conspirators – reinsurers willing to play Guy Carpenter’s game
of deceit, and damage consumers,” the statement said. GCC, he
added, had “essentially created markets that, in its own words,
were insulated from competition”.

According to Blumenthal’s statement, GCC allegedly funnelled
lucrative business to “select inner circles of reinsurers – or
facilities – in exchange for excessive fees and other benefits from
these reinsurers”. Reinsurers included in these facilities agreed
not to compete against the prices and terms set and instead agreed
to be bound by the same prices and terms as the other participants.
If a reinsurer did not co-operate, it was denied access to
potential reinsurance business that it was willing to compete for
and write.

In a response to the lawsuit, GCC stated: “The Connecticut attorney
general’s complaint is based on a fundamental misunderstanding of
reinsurance facilities that have been in operation for the benefit
of small- and mid-sized clients for as long as 50 years. As many of
our clients have confirmed during this investigation, these
facilities result in improved availability and terms of reinsurance
and ultimately benefit insurance buyers.”

GCC concluded: “Simply put, there is no basis for the attorney
general’s lawsuit and we intend to defend ourselves
vigorously.”