A Texas probe into Allied World Assurance Company?s business relationships with its two largest shareholders and a company review into insurance brokerage practices has resulted in the indefinite suspension of AWAC?s chief underwriting officer.

According to its amended regulatory filing for an initial public offering filed yesterday, AWAC was served with a civil investigative demand by the Antitrust and Civil Medicaid Fraud Division of the Office of the Attorney General of Texas on November 8 last year.

The AG?s office is investigating possible restraint of trade in several Texas markets arising out of the company?s business relationships with American International Group and The Chubb Corporation.

AIG and Chubb are the largest holders of AWAC with 23.3 percent and 18.6 percent stakes respectively.

The AG office is also seeking information on AIG?s and Chubb?s role in the company?s business, sharing of business information and any agreements not to compete. In addition, the AG?s office is also probing insurance industry practices relating to contingent commissions, placement services or other agreements that AWAC may have had with brokers or producers as well as whether AWAC placed any non-competitive bids in connection with the placement of insurance.

?We are co-operating in this ongoing Investigation, and we have produced documents and other information in response to the CID,? AWAC said in its regulatory filing.

Following discussions with the Attorney General?s office on May 26 this year, AWAC expects the investigation to proceed to litigation, enforcement proceedings or a voluntary settlement which will ?likely result in civil penalties, restitution to policyholders or other remedial efforts that would be adverse to us.?

?In connection with the investigation and our review relating to certain insurance brokerage practices, our chief underwriting officer was suspended indefinitely,? the filing said.

The company did not name the suspended employee.

The filing added that the outcome of the investigation will likely form a basis for investigations, civil litigation, enforcement proceedings or other voluntary settlements.

As it moves ahead with its initial public offering, AWAC Bermuda is also moving to ?vigorously defend? against a court action filed by New Cingular Wireless Headquarters, LLC and 19 other corporations.

AWAC is also among a group of 78 insurers along with brokers Marsh & McLennan Companies and Aon Corporation named in the suit which alleges bid rigging, steering and other anti-competitive practices. The defendants have until June 23 to respond to the complaint.