The US operating arm of ACE Limited has agreed to pay $4.5 million to resolve allegations that it was involved in "pay to play" tactics used by insurance brokers in the US to inflate premium rates for business.

It is alleged that ACE conspired with Marsh and other brokers to submit fake bids to create the illusion of a competitive bidding process, even though the broker had already determined which insurer would receive a particular policyholder's business. Government agencies and businesses were said to have been affected.

The brokers were allegedly rewarded with payments, known as contingent commissions, for helping steer business to particular insurance companies.

Delaware-based ACE Group Holdings has not admitted any liability in relation to allegations of conspiracy with Marsh & McLennan and others in alleged multi-state bid-rigging and price-fixing claims.

However, it has agreed to pay $4.5 million to a multi-state task force that has been investigating the allegations, which date back to the period 2002 - 2004.

ACE has already paid $40 million into a fund to be paid to its policyholders who purchased or renewed excess casualty policies with Marsh between 2002 and 2004. Since 2006 ACE's offices in the US issuing policies domestically has ceased all payments of contingent commissions to any non-Executive agent or broker in relation to placement of any excess casualty insurance policy and this voluntary measure will remain in place throughout 2008.

ACE Group has been co-operating with Florida Attorney General Bill McCollum and his office during the investigation.

In a statement last week, Mr. McCollum's office said: "ACE Group and its subsidiaries will pay a multi-state task force $4.5 million to resolve allegations of bid-rigging and price-fixing in the commercial insurance market that resulted in higher premiums being paid by Florida governmental entities, companies and non-profit organisations."

And Mr. McCollum said: "The insurance industry must ensure that Florida policyholders are treated fairly. We will continue our efforts to restore accountability and transparency to insurance markets."

ACE has also agreed to a consent decree and final judgement in court that will provide comprehensive injunctive relief, including the disclosure of any compensation that ACE pays to insurance brokers.

Florida's chief financial officer Alex Sink said: "It's wrong that governments and businesses paid inflated insurance rates because they were led to believe there was competition when there wasn't. I applaud this settlement, because policyholders deserve to know exactly what they are paying for and that they are paying a fair price for it."

Other US states involved in the investigation and settlement are Hawaii, Maryland, Massachusetts, Michigan, Oregon, Texas, West Virginia and the District of Columbia.

ACE has been co-operating with the multi-state task force and provided assistance. Under the consent decree and final judgement ACE will now disclose the amount of payments it makes to an insurance broker is requested to do so by a customer or prospective policyholder.