ALBANY, N.Y., May 1 – ACE Limited and its United States subsidiaries have agreed to pay $80 million in restitution and penalties under an agreement reached with New York State Attorney General Elliot Spitzer and New York State Insurance Department Superintendent Howard Mills.

ACE, a Bermuda based company that trades on the New York Stock Exchange, agreed to the settlement to resolve allegations of bid-rigging and improper finite reinsurance transactions.ACE, in addition to the fine, agreed to adopt a series of sweeping reforms in its business practices and to offer an apology acknowledging its improper conduct.

The settlement agreement, called an Assurance of Discontinuance and Volun-tary Compliance, alleges that ACE was a full participant in a scheme to fix insurance prices in the excess casualty area.According to an e-mail from a company senior executive, ACE knowingly provided a losing bid to provide insurance coverageto create the illusion of a competitive bid.

Also detailed was ACEs use of improper finite reinsurance to bolster both its financial results and those of its clients.In 2000, ACE entered into a sham reinsurance agreement with American Capital Access (ACA), a privately held U.S. insurer.Under the deal, ACE and ACA entered into a series of reinsurance contracts that appeared to contain sufficient risk to qualify as reinsurance. The two parties, however, entered into secret side agreements that capped and guaranteed the profits ACE could make from the deal, thereby eliminating any risk for either party.

ACE apologized for the improper business practices and said it has instituted reforms and is satisfied that this behavior will not be repeated.According to ACEs statement, [I]n order to promote transparency and reduce the potential for conflicts of interest, ACE has supported legislation in the U.S. to eliminate contingentcompensation and through this agreement pledges to continue to do so.

Under the agreement, $40 million will be paid to ACE policyholders harmed by the rigging activities, and ACE will pay $24 million to New York and $8 million each to Connecticut and Illinois.