NEW YORK (Bloomberg) ? Zurich Financial Services AG, Switzerland's biggest insurer, agreed to pay $153 million to settle bid-rigging and accounting probes in New York, Illinois and Connecticut.

The company, the No. 3 commercial insurer in the US, will pay $88 million in restitution to policyholders and $65 million in penalties, New York Attorney General Eliot Spitzer said in a statement today. Zurich Financial has now earmarked a total of about $325 million to settle investigations in 13 states.

Yesterday's settlement followed landmark agreements by Marsh & McLennan Cos., the world's biggest insurance broker, and American International Group Inc., the largest insurer, over accounting and sales practices. State and federal regulators including Spitzer wrested about $2.5 billion from those two companies, and more than a dozen others were subpoenaed since 2004.

"I'd expect a few more of these good-sized settlements, then the smaller ones will tend to dribble out over time," said James Cox, a professor of securities law at Duke University in Durham, North Carolina who has followed Spitzer's probes into Wall Street research, mutual funds and the insurance industry. "Insurance companies want to put these investigations behind them fairly quickly because of the impact on their reputations."

Shares of Zurich Financial fell 1 Swiss franc, or 0.3 percent, to 312.25 francs in Switzerland, valuing the insurer at 45 billion francs ($34.3 billion). The stock of the Zurich-based company is up 12 percent this year.

"Zurich's willingness to acknowledge problems, adopt reforms and provide appropriate compensation to customers will help the company move forward and will help promote full and fair competition in the insurance industry," Spitzer said in the statement.

Spitzer's investigation of bid-rigging at New York-based Marsh & McLennan led to probes of the insurers with which they did business, including Zurich Financial, AIG, Ace Ltd., and Hartford Financial Services Group Inc. Marsh & McLennan paid $850 million to settle Spitzer's civil lawsuit in January, 2005, and at least 17 people, including three former underwriters at Zurich Financial, pleaded guilty to criminal charges.

Zurich Financial participated in rigged auctions with predetermined outcomes, Spitzer and his counterparts in Illinois and Connecticut said in the settlement agreement. Marsh & McLennan picked the winning bid to steer insurers who paid it fees, denying customers the best price, they said.

In addition to the restitution, Zurich Financial will pay $39 million in penalties to New York and $13 million each to Connecticut and Illinois. The company announced a bid-rigging settlement with nine other states on March 19, and has since added West Virginia.

"The agreements concluded within the last two weeks represent significant progress in Zurich's effort to resolve the uncertainty associated with certain industry-wide practices," said Zurich Financial Chief Executive Officer James Schiro, 60, said in a separate statement.

The company also improperly used so-called finite risk or non-traditional reinsurance to bolster its own results and those if its clients, the settlement said, citing a 1998 contract with MBIA Inc. in one example.

State and federal regulators in the U. have been investigating instances when insurers may have disguised low-cost loans as reinsurance to get favourable accounting treatment and smooth earnings.

New York-based AIG last month settled allegations that it used a reinsurance contract with Berkshire Hathaway Inc.'s General Re to inflate its reserves for claims by $500 million. Insurers and reinsurers including Ace, MBIA Inc., XL Capital Ltd., CNA Financial Corp., RenaissanceRe Holdings Ltd., and PartnerRe Ltd. have also been subpoenaed.