Zurich American Insurance has reached a US-wide settlement of $US171.7 million ($236.6 million) with nine US state regulators over bid-rigging and price-fixing allegations.

Zurich allegedly conspired with brokers in what the regulators have been calling a “pay-to-play” scheme, which resulted in higher premiums being paid by policyholders and government entities.

As part of the scheme, Zurich submitted fake bids to create the illusion of a competitive bidding process, even though the broker had already pre-determined the winner. Zurich was rewarded by having other lucrative business steered to it and in turn paid contingent commissions to the brokers, which the brokers then did not disclose to customers.

Under the agreement, Zurich will repay US policyholders $US151.7 million ($209 million) and the states which investigated the allegations the remaining $US20 million ($27 million).

Other states in the settlement are Florida, Texas, California, Pennsylvania, Massachusetts, Hawaii, Maryland, Oregon and West Virginia.

Florida Attorney-General Charlie Crist said in a statement that the payout will assist in restoring “integrity and accountability to insurance markets”.

Last week Mr Crist announced his office had filed a “racketeering and anti-trust” lawsuit against mega-broker Marsh & McLennan.

He alleges the group engaged in bid-rigging and manipulated insurance markets in order to obtain higher commissions.