LONDON (Reuters) ? The controversial practice of insurers paying brokers commissions based on the amount of clients? business they place with them is widespread throughout Europe, senior insurance figures told Reuters yesterday.

The payment of so-called ?contingent commissions? by insurers to brokers have come under intense scrutiny after New York Attorney General Eliot Spitzer on Thursday sued Marsh & McLennan Cos, the world?s largest insurance broker, for allegedly rigging quotes for coverage.

The probe has caused shares across the insurance sector to slide as fears grow that a new financial scandal is brewing.

Thierry Van Santen, president of Ferma, a body that represents insurance buyers at European-based corporate giants, said the payment of such commissions ?is known as a common practice in the UK and in Europe.?

Van Santen said market-rigging may take place in Europe in the way that is alleged by Spitzer to have taken place in the United States, where Marsh is claimed to have solicited insurers to submit uncompetitive bids so it could funnel business to firms that paid it fees. ?While I have no knowledge that market-rigging is taking place in Europe I do not see why we may not have the same problem over here,? he said.

?After all, market-rigging can only begin when brokers are being paid contingent commissions by some insurers. That is already happening here.?

The payment of such fees has contributed to the rising cost of insurance to clients, Van Santen said, as firms have ratcheted up their prices so the payments being demanded by brokers don?t eat into their own profits, he said.

Graham McKean, chairman of privately owned insurance and reinsurance brokerage BMS Group, confirmed that contingent commissions have been paid in London for decades, though he added that his company?s policy is to never accept such fees.

?I know for a fact that these practices were around at Lloyd?s 30 years ago,? he said. ?Underwriters tell me these (commissions) were invented in London and exported to America.?

But McKean said he thought it would be difficult for brokers to rig the market in London. ?I don?t know for sure but it?s very unlikely for a particular reason. London is a subscription market in which a very large number of people are involved.?

The London insurance market is made up of 66 Lloyd?s syndicates as well as dozens of small insurance companies, which each compete for a portion of large risks. ?If you tried to rig a subscription market it?d be all over the street in two seconds flat,? said McKean.

But the association representing insurance buyers at the UK?s biggest firms, AIRMIC, said it is asking its members whether some of the abuses alleged by Spitzer are prevalent this side of the Atlantic.

Though the payment of contingent commissions are not illegal, Van Santen of Ferma, whose members buy billions of euros worth of insurance cover each year, said: ?We are strongly against this practice.?

He said: ?It goes against the true role of the broker, which is to be the client?s advisor ... The system, where you work with a guy who is also being paid by the other party, is wrong.?

Both AIRMIC and Ferma have requested brokers disclose to clients exactly how much they get paid and by who when placing their business. But Van Santen said ?we?ve not seen many signs of this taking place.?

AIRMIC issued a code of practice on disclosing contingent commissions six years ago. But only AON Corp., the world?s number two insurance broker, and a handful of smaller brokers have signed up to this, an AIRMIC spokesman said.

?This lack of transparency strongly affects the relationship insurance buyers have with their (brokers),? Van Santen said.

A number of companies that are Ferma members have taken a lead in improving disclosure by requiring their brokers to document fully the extent of their remuneration on the business they place for them, signed by top executives at the brokers.

Marsh said it had revenue from contingent commissions of $845 million in 2003 across its global business, equivalent to 12 percent of its risk and insurance services revenues. Jardine Lloyd Thompson told Reuters last Friday that contingent commissions account for about 2 percent of its annual revenues

Aon said it received about $200 million of such fees in 2003, which is equivalent to 0.5 percent of the overall premiums it handled in that year. It declined to say what proportion of those were in Europe.

Willis Group did not return calls requesting information.