(Bloomberg) ? Willis Group Holdings Ltd., the world?s third-largest insurance broker, agreed to pay $50 million to settle New York Attorney General Eliot Spitzer?s investigation of collusion between brokers and insurers.

The money will compensate policyholders who got insurance through Willis between 2001 and 2004, Spitzer and Willis said in statements yesterday. Willis joins the two biggest brokers, Marsh & McLennan Cos. and Aon Corp., in resolving claims that they steered business to insurers that paid hidden fees.

Willis?s settlement is the smallest of the three and came with Spitzer?s praise for Chief Executive Officer Joe Plumeri. Spitzer?s refusal to negotiate with former Marsh CEO Jeffrey Greenberg led to his ouster in October, and the attorney general accused Aon Chairman Patrick Ryan of personally negotiating an agreement to steer clients to insurer Chubb Corp.

?Willis moved quickly to remedy its problems,? Spitzer said in his statement. Plumeri ?has demonstrated admirable leadership in spearheading Willis?s response.?

The settlement is part of the fallout from the first leg of insurance industry investigation Spitzer began last year. Since he sued Marsh on October 14, he?s expanded his investigation beyond anticompetitive practices to a type of reinsurance that may be used to distort an insurer?s financial position.

Spitzer?s settlement will reimburse clients across the country. Willis has also agreed to pay an additional $1 million to its Minnesota clients under a separate pact with Minnesota Attorney General Mike Hatch. Neither prosecutor sued Willis in the case.

All three brokers agreed to pay amounts correlating with the so-called contingent commissions insurers paid them, fees Spitzer said were tantamount to kickbacks. Marsh, the biggest broker of insurance, settled for $850 million in January; Aon agreed to pay $190 million last month. None of the companies admitted or denied wrongdoing. All have banned the fees.

Shares of Willis rose $1.03, or 2.8 percent, to $37.35 in New York Stock Exchange composite trading. Standard & Poor?s said it?s no longer reviewing whether to cut Willis?s BBB- credit rating.

?This puts a significant issue behind the company,? said Peter Streit, an analyst at Williams Capital Group in New York who has a ?buy? rating on Willis shares. ?It removes a lot of uncertainty.?

Insurance brokers are middlemen that help companies find insurance. They get much of their revenue by charging clients commissions that are based on a percentage of the premium the insurer charges. Spitzer said a second source of revenue ? fees insurers paid as a reward for the volume or profitability of the business ? made them ignore the best interests of their customers.

Spitzer said Willis executives agreed to a strategy of maximising ?premium volume flow to key carriers? who paid the most in contingent commissions, according to settlement documents.

In a 2003 e-mail, Willis executive James Drinkwater said he wanted regional marketing officers to direct business to ?partner markets? that paid contingent commissions, according to settlement documents. Spitzer said partner markets included Chubb, St. Paul Travelers Cos., Hartford Financial Services Group Inc., and Crum & Forster Insurance Co.

Hartford spokesman Joshua King said the company has been cooperating with Spitzer and conducting its own review with outside counsel. St. Paul Travelers also continues to cooperate, said spokeswoman Joan Palm, declining to comment further. Chubb spokesman Mark Greenberg and Crum & Forster spokesman Allan Fliss declined to comment.

Spitzer also said Willis used its leverage with insurers eager for business to get them to use Willis for reinsurance arrangements. He cited an e-mail from Willis?s Tony Ainsworth, who was in charge of such efforts, indicating he moved to curtail e-mail and written documents about the deals after Marsh was sued.

?It does not mean that we will not be working with retail/wholesale on accounts but more in a low key manner,? Ainsworth wrote in a November 15 e-mail to his colleagues. ?Keep talking to our friends and find out where the business is being sent ... just do it verbally or in person!?

Spokesman Dan Prince said the company has taken appropriate disciplinary actions.

Settlement documents also said in one instance, Willis solicited and received false bids from Zurich Financial Service AG and CNA Financial Corp. in order to ensure that its client chose a third insurer ? the only one that had truly bid for the business. Zurich spokesman Keith Owens and CNA spokesman Charles Boesel declined to comment. As part of the settlement agreement, Willis agreed to disclose to clients all compensation that the company receives. Willis also prohibited employees from receiving pay or gifts from insurers. Willis, previously owned by buyout firm Kolhberg Kravis Roberts & Co., said it?s the first broker that Spitzer hasn?t required to make a formal apology. In settlement documents, the company said it ?accepts responsibility and deeply regrets? its behaviour. Willis recognises that ?certain of its employees failed to abide by Willis?s standards of conduct in their dealings with clients,? the papers said.

Plumeri, 61, joined Willis in 2000 after 32 years at Citigroup Inc. and its predecessor companies. Willis sold shares to the public in 2001 and Kohlberg Kravis has reduced its stake to 5.4 percent of outstanding stock, according to a proxy the company filed this year.