Bermuda-based global insurer Ace has settled a bid-rigging investigation by the US states of New York, Illinois and Connecticut for $US80 million ($105 million) in restitution and penalties.

The settlement was announced in New York by the state’s Attorney-General Eliot Spitzer.

Ace and some US subsidiaries were accused of bid-rigging and improper transactions in finite insurance and reinsurance contracts.

“We continue to clean up the insurance industry,” Mr Spitzer said. “Ace is also adopting reforms designed to address the problems created by the use of contingent commissions and finite insurance.”

Half the settlement will go to Ace policyholders who were victims, Illinois Attorney-General Lisa Madigan said. The other half will go to the states in penalties.

“Because of this illegal conduct, policyholders did not get the impartial recommendations they deserved to get and they ended up paying more for their insurance,” Ms Madigan said.

Mr Spitzer had accused Ace of being “a full participant” in plans to fix premiums. His evidence included an email from a senior Ace executive saying the insurer would deliberately lose a bid on a business insurance contract offer to create the appearance of a competitive bidding process.