Zurich American Insurance has agreed to pay nearly $172 million (€141 million) in a deal with nine states to settle allegations of bid-rigging and price-fixing in the commercial insurance market.

Policyholders in all 50 states would receive $151.7 million in refunds, Mark Tobey, a lawyer with the Texas Attorney General's office, said.

The US unit of Zurich Financial Services would pay an additional $20 million to the nine states, including investigative costs, legal fees and payments in lieu of civil penalties, said Mr Tobey, who helped negotiate the deal.

The settlement is the latest in a broad investigation by state authorities into the practice of "contingent commissions" insurers paid brokers.

Regulators say the commissions were part of a scheme between the companies and brokers to inflate premiums and overcharge commercial policyholders.

The states in the Zurich settlement are California, Florida, Hawaii, Maryland, Massachusetts, Oregon, Pennsylvania, Texas and West Virginia.

Keith Owens, a spokesman for Zurich American, yesterday confirmed a settlement "to resolve inquiries related to insurance business practices". He said he had no further details.

Marsh & McLennan, America's largest insurance broker, agreed last January to pay restitution to settle a New York state investigation into bid-rigging, price-fixing and the use of hidden incentive fees.

Marsh publicly apologised for "shameful" and "unlawful" conduct.

Eight people have been indicted on criminal charges of bid-rigging between November 1998 and September 2004. Previously, 17 executives at five companies pleaded guilty to criminal charges related to the investigation.

Abbott said Zurich participated in such a scheme with Marsh. "Businesses shopping for commercial insurance were deceived into believing they were getting the best deals available," Abbott said in a statement.

"The whole anti-competitive scheme was an intentional smokescreen by several insurance players to artificially inflate premiums and pay improper commissions to those who brokered the deals."

Massachusetts attorney general Tom Reilly added: "Insurance companies will not get away with deceiving their customers, inflating prices, or manipulating the insurance marketplace." - (PA)