GUY
CARPENTER
Sightings from The Catbird Seat
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From their website www.guycarp.com:
A Reputation for Forward-Looking Ideas
The history of today’s leading reinsurance intermediary dates back more than 80 years to Guy Carpenter, a man with a vision, who laid the foundation for reinsurance as it is known today....
On a now-famous transatlantic crossing in 1923, Guy Carpenter met with Henry W. Marsh and Donald R. McLennan. Visionaries themselves, these two insurance brokers saw the value of Guy Carpenter’s ingenuity. Shortly thereafter, Marsh & McLennan bought Guy Carpenter’s firm, launching a relationship highlighted by decades of successful innovation....
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October 8, 2007
Marsh & McLennan unit
sued by Connecticut
Reuters
NEW YORK - The state of Connecticut has accused a unit of Marsh & McLennan Cos Inc of illegally inflating insurance costs for consumers nationwide, Attorney General Richard Blumenthal said on Monday.
The antitrust suit names the Guy Carpenter unit, Marsh & McLennan's risk and reinsurance specialist. It seeks unspecified damages, restitution and civil penalties.
The suit is the latest blow to Marsh & McLennan, whose Chief Executive Michael Cherkasky has been looking to regain investor confidence since an $850 million settlement in 2005 of a suit brought by the state of New York.
Marsh & McLennan, the world's largest insurance broker, did not return calls seeking comment.
The company's shares, down more than 14 percent this year, were down 36 cents, or 1.3 percent, to $26.41 in Monday afternoon trading on the New York Stock Exchange.
Blumenthal charged Guy Carpenter, which helps insurers spread the risk of losses by placing coverage with reinsurers, with creating markets that were, in its own words, "insulated from competition."
"Guy Carpenter served as ringleader in choreographing the reinsurance market to fix prices, stifle competitors and collect excessive profits at the expense of the entire industry," Blumenthal said in a statement.
He added that the "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 lawsuit names Excess Reinsurance Co, based in Philadelphia, and partly owned by Guy Carpenter, as a defendant in the action, and said "co-conspirators" included Arch Reinsurance Company, a U.S. unit of Bermuda-based Arch Capital Group , Aspen Insurance UK Limited, a unit of Bermuda-based Aspen Insurance Holdings ; and Swiss Reinsurance America Corp, a unit of reinsurance giant Swiss Re.
Blumenthal said the practices potentially cost consumers "hundreds of millions of dollars," and had gone undetected for nearly 50 years.
He blamed the "unregulated" nature of the reinsurance industry, for the matter having flown under the radar for so long.
Guy Carpenter over time exploited about 170 insurers, Blumenthal charged.
Monday's announcement comes after Blumenthal issued about 20 subpoenas in July as part of an investigation into anti-competitive practices in the reinsurance industry.
Blumenthal said the investigation was "active and ongoing."
The state of Ohio in August filed an antitrust suit accusing Marsh & McLennan and other insurers and their subsidiaries of price-fixing and anti-competitive behavior.
http://www.abcnews.go.com/Business/wireStory?id=3703616
October 14, 2004
White House For Sale
CONTRIBUTORS AND PAYBACKS
PIONEER PROFILE:
Craig Stapleton worked in the White House of the first President Bush (who appointed him to the Peace Corps board) and married the second President Bush’s cousin, Dorothy.
From 1982 until President George W. Bush nominated him as U.S. Ambassador to the Czech Republic in 2001, Stapleton was president of Marsh & McLennan Real Estate Advisors, the leasing unit of Marsh & McLennan Companies. Stapleton also invested with Bush in the Texas Rangers ball team that made Bush a millionaire 15 times over.
Bush’s profits got a boost from the other partners, who gifted him extra equity in the deal, and by local taxpayers, who paid $135 million for the team’s new stadium.
When the hospitality division of the Blackstone Group investment bank merged with CUC International in 1997, CUC designated Stapleton as one of its directors on the board of the new Cendant Corp. The following year, Cendant slashed its reported earnings over the past three years by $650 million due to massive accounting fraud at CUC.
With Stapleton, ex-Defense Secretary William Cohen and ex-Canadian Prime Minister Brian Mulroney on its board, Cendant then settled investor lawsuits for a record $3.1 billion.
That same year, Stapleton organized a 1998 Bush fundraiser that netted $250,000.
As the No. 1 stockholder in Vacu-dry Co., Stapleton joined other board members in June 1999 in a sudden decision to abandon its apple-drying business. The decision wiped out 276 plant jobs and blindsided Sonoma County apple growers....
Stapleton’s longtime employer owns Marsh Mercer Consulting Group and Putnam Investments. After Massachusetts regulators issued subpoenas in 2003 to probe allegations that Putnam gave special privileges to elite mutual fund investors, the company fired 15 employees for personally profiting from rapid-fire, “market-timing” trades in Putnam mutual funds and then fired Putnam CEO Lawrence Lasser.
In 2004, research firm Morningstar, Inc. ranked a college savings plan that Putnam administers in Ohio as one of the five worst in the nation due to the excessive fees that it reaps from these educational accounts.
Marsh & McLennan had almost $2.5 million in federal contracts in fiscal 2002, mostly with the Treasury Department.
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November 10, 2004
Marsh Plans to Cut 3,000 Jobs
to Offset Recent Setbacks
By Joseph B. Treaster, The New York Times
Staggered by accusations that it cheated its customers, Marsh & McLennan Companies, the world’s biggest broker of commercial insurance, said yesterday that it would lay off 3,000 employees, or 5 percent of its work force.
Marsh, which earlier forced out its chief executive and three high-level executives, is shaking up its business model in an effort to eliminate potential conflicts of interest and to offset losses resulting from an investigation by Eliot Spitzer, the New York attorney general....
The new chief executive, Michael G. Cherkasky, a former prosecutor, said in an interview yesterday that he was also selling Marsh’s Falcon 900 corporate jet, getting rid of a fleet of half a dozen Mercedes and BMW sedans with chauffeurs and ending the company’s long tradition of a free lunch for two dozen top executives in the company’s 44th-floor executive suite.
In a conference call with investors and analysts, Mr. Cherkasky said, “We’re doing all the right things to stabilize this business.”
That brokerage business has been buffeted since Mr. Spitzer sued Marsh last month, accusing the company of rigging bids and fixing prices....
Mr. Cherkasky said Marsh’s investigators had found no evidence of brokers engaging in tying – putting pressure on insurance companies, which depend on the brokers for sales of policies to corporations, to permit a brokerage firm to handle the purchase of coverage the insurers need to reduce their own risks. Still, he said that as part of his reorganization of Marsh he was directing the company’s Guy Carpenter subsidiary, the unit that arranges coverage for the insurers - known as reinsurance - to begin reporting directly to him...
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AXS and MMC relationship
Posted by czechsinthemail, www.yahoo.com
Spitzer suit vs. Aon Likely, analysts say
By Alistar Barr, CBS MarketWatch
Aon will likely become the second insurance broker to be sued by New York Attorney General Eliot Spitzer, analysts said Thursday.
Aon shares have lagged a slight recovery by Marsh & McLennan in recent days, amid concern that the second-largest insurance broker will face the same bid-rigging and steering charges as its larger rival, or entirely new allegations relating to so-called tying.
Tying occurs when brokers direct the business of their corporate clients to insurance companies in return for those insurers using the broker for their own reinsurance packages.
Axis Capital (AXS), a Bermuda-based reinsurer, said late Wednesday that it got a new subpoena from Spitzer on Oct. 21 as part of an industry-wide investigation into tying....
Leading brokers, such as Marsh & McLennan and Aon, also generate revenue from insurers that they helped start and own stakes in, Barile said. “When they started Bermuda reinsurance companies, they would be the reinsurance broker for that firm as well.”
Aon was one of the leading investors in Endurance Specialty Holdings (ENH), a Bermuda-based reinsurer set up after the Sept. 11, 2001 terrorist attacks, and also acted as its main reinsurance broker, according to an Endurance filing with the Securities and Exchange Commission in 2002.
“It is possible that certain brokers and intermediaries that compete with Aon will perceive a conflict of interest in our relationships with Aon,” Endurance said in the filing.
Marsh had a similar relationship with Axis, which it invested in via its MMC Capital private equity unit.
Axis used Marsh and Guy Carpenter & Co., Marsh’s reinsurance unit, for 38 percent of its gross written premiums in 2002, according to an Axis filing with the Securities and Exchange Commission.
For more on 9-11 profiteering by insurance companies, GO TO > > > Allied World Assurance
< < < FLASHBACK < < <
January 5, 1997
Mr. John Sinnott, Chairman of the Board
Marsh & McLennan, Incorporated
1166 Avenue of the Americas
New York, NY 10036-277
SUBJECT: Settlement Proposal for Fraud/Misrepresentation Claim
Dear Mr. Sinnott:
The purpose of this letter is to present my claim for damages directly to you and your insurance carriers in an effort to negotiate a fair and reasonable settlement and to avoid the adverse publicity and high cost of a lawsuit.
As background, I was formerly the Risk/Insurance & Safety Manager for the Kamehameha Schools Bishop Estate (KSBE), a tax-exempt charitable organization, and President of P&C Insurance Company, Inc. (P&C), a captive insurance company wholly-owned by Pauahi Holdings Corporation, a for-profit subsidiary of KSBE.
On November 20, 1996, I received my termination notice from KSBE from my superior, Nathan Aipa, who is the General Counsel and Director of the Legal Group for KSBE. The letter states, "This action is being taken in recognition of a fundamental philosophical difference between (1) our teamwork and management approach within the Legal Group, and (2) your view and approach to the management of the risk insurance and safety department."
At the same meeting, Mr. Aipa gave me my termination notice as President of P&C Insurance Company, Inc., in the form of a letter from Henry H. Peters, Chairman of the Board of Directors. This letter gave no reason for the termination.
I consider both terminations to be wrongful and instituted for unreasonable and unjust causes, and I have filed a wrongful termination claim with KSBE and its insurance carriers. My letter of December 29, 1996 to the Trustees details the motives and provides the evidence to support my claim. A copy is enclosed for your information and review.
As you will note throughout my letter to KSBE, the Honolulu offices of Marsh & McLennan, Inc. (MMI) and M&M Insurance Management Services, Inc. (IMS) have been heavily involved in the wrongful actions which resulted in my termination, and it is for these actions that I am bringing this claim against MMI and IMS.
In 1990, I placed KSBE's complete insurance program out for competitive bidding. MMI provided what I considered to be the best proposal, with a key element being that MMI had the facilities and capabilities to assist in the formation and on-going management of a captive, which the incumbent agent lacked. The Trustees approved the appointment of MMI as KSBE's broker of record, based upon my recommendation.
The captive formation project was sidelined for a few years mainly due to discussions on tax-related issues. In 1994, however, Trustees gave approval to my recommendations that we proceed with forming a captive....
Peter Lowe, Vice-President of IMS presented a fee proposal on June 7, 1994 (copy enclosed) which was approved by the Trustees. You will note that the Cost of Services for Ongoing Management (page 2) shows a total of $66,500 based on approximated time and expense.
P&C received its charter from the State of Hawaii in September, 1994 and wrote its first policies effective October 1, 1994. As President of P&C, I signed an Insurance Management Agreement between IMS and P&C to provide on-going management services (copy enclosed). The services to be performed by IMS are stated in the Agreement, as well as Compensation and Expense Provisions which state that the fees charged by IMS will be on a time and expense basis and that IMS shall render monthly statements to P&C.
I have had suspicions for several years that something was going on between Rocco Sansone and KSBE management. Even before I was transferred from the Administration Group to the Legal Group, there were private meetings held with Sansone, Aipa and Gil Tam. Later on, there were often private meetings and communications between Sansone, Aipa, Louanne Kam and Henry Peters. When I learned of these meetings and questioned their purpose, Sansone explained them as efforts to assist me in communicating my risk management responsibilities to my superiors and other managers.
It was not until I began to seek alternatives to MMI's property placements, however, that my suspicions of collusion between these individuals were confirmed. My letter to the Trustees details the many issues which involved MMI and IMS; therefore, I will not repeat them all here.
However, the following excerpts from my letter are particularly relevant to my claims against MMI and IMS:
Page 5, which references Exhibit 7:
I consider MMI's actions to be extremely unethical, unprofessional and costly to KSBE. Their questionable actions contributed to the delays in final presentation of the staff report to Trustees, which cost KSBE over $75,000 in premiums. The fact that we were unable to write the property insurance in P&C by July 1 or October 1, 1996, cost P&C over $1 million in gross written premium.
In view of these actions on the part of MMI, my recommendation was that KSBE place their insurance program and the captive insurance management contract out to bid for the July 1, 1997 renewals (if not before), and have P&C write the property program on the same date. It is my belief that this recommendation contributed significantly to my termination twelve days later.
Page 7, under "Arms-length Relationships/Conflicts of Interest":
The officers (of P&C) included myself; Peter Lowe, an officer of M&M Insurance Management Services, Inc., which is a subsidiary of Marsh & McLennan, Inc.; William Richardson, a former trustee and current consultant for KSBE; and Nathan Aipa, General Counsel for KSBE. KSBE has also been involved with another MMI subsidiary, Guy Carpenter, through its sizable investments in two Bermuda insurance companies, Centre Reinsurance and Mid-Ocean Reinsurance....
Claims committee members included...Rocco Sansone (MMI) and Pat Onogi (MMI)....
Very truly yours,
<s> Bobby N. Harmon, CPCU, ARM, AAI
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FOR MORE MARSH BIRDS
GO TO
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A CONNECTICUT YANKEE IN KING KAMEHAMEHA’S COURT
CONSECO: BIRDS IN THE TRAILER PARK
THE CARLYLE GROUP: BIRDS THAT DRINK FROM CESSPOOLS
DIRTY MONEY, DIRTY POLITICS & BISHOP ESTATE
HARMON’S CLAIM LETTER TO JOHN SINNOTT
HARMON’S LETTERS TO INSURANCE COMMISSIONERS
MARSH & McLENNAN: THE MARSH BIRDS
MARSH & McLENNAN’S TRIDENT FUNDS
THE PRUDENTIAL: A NEST ON SHAKY GROUND
TRANSYLVANIA TRAVELERS IN ST. PAUL
ZEROING IN ON ZURICH FINANCIAL SERVICES
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Last Update November 14, 2007, by The Catbird