Bermuda-based insurance giant ACE Limited yesterday said it was taking seriously allegations that the company had taken part in 'bid rigging' practices with leading broker Marsh & McLennan ? but that it was satisfied that the cases of the "illegal" activity were contained, and that clients understood this.

The company said recently that it was conducting its own internal investigation and was suspending payments of the controversial placement service agreements (PSAs) that it had previously paid as a reward to brokers for placing business with ACE.

Marsh is faced with a damning lawsuit from New York Attorney General Eliot Spitzer, revealed earlier this month after a months long probe of how insurers reward brokers for sending business their way.

Marsh was the only defendant in the action, but ACE, American International Group (AIG), Hartford and a unit of Munich Re, were named in the suit charging that not only did Marsh reap a large portion of its profit from the PSA payments and that it had driven a sham 'bid rigging' process designed to create the false appearance of competition. The civil suit alleges that Marsh's practices were fraudulent and violated antitrust and securities laws.

One ACE employee Patricia Abrams has pleaded guilty to a misdemeanour charge related to the case. In addition, a report in the Wall Street Journal revealed that the head of ACE USA, Susan Rivera, had been made aware by e-mail months before the probe, of ACE participating with March in the rigged bid process.

On an earnings call with investment analysts yesterday ? following ACE reporting a net loss of $3 million from 'unprecedented' hurricane and typhoon activity this year ? ACE president and CEO Evan Greenberg said he could not rule out some customer backlash from Mr. Spitzer's allegations, but that most understood it was a contained case.

Mr. Greenberg added "bid rigging is clearly illegal".

He added that he did not want to speculate on how the investigation would impact the market, but he knew for ACE's part that the desire was "do the right thing we want to conduct ourselves in a fit and proper manner".

The matter was one that he chose to address even before delving into the company's financial performance in the third quarter, saying he wanted to first spend a few minutes on the New York Attorney General's charges of 'bid rigging' and restrain of trade, in the industry.

Earlier in the week, Marsh boss Jeffrey Greenberg ? who is Mr. Greenberg's brother while both are the sons of AIG head and insurance legend Maurice 'Hank' Greenberg ? stepped down amid the controversy.

On the subject of customer fall out, ACE' s Mr. Greenberg said: "I am not going to be arrogant enough to say there will not be customers who may be disturbed by what they have seen. But in the main, any abhorrent or illegal behaviour, we believe is restricted to small number in the organisation and believe customers understand that."

He added that he did not know when the investigation would be completed, but that ACE was cooperating.

"I want to be clear at ACE we expect the highest standards of behaviour."

In the company's earnings report released on Tuesday night, ACE said: "There can be no assurance that ACE will not be named in future actions.

"ACE cannot at this time estimate its potential costs related to these matters and accordingly no liability is being established at this time.

"In the opinion of ACE's management, ACE's ultimate liability for these matters is not likely to have a material adverse effect on ACE's consolidated financial condition, although it is possible that the effect would be material to ACE's consolidated results of operations for an individual reporting period."

Several class action law firms have also threatened to take legal action against ACE and current and former management as a result of the broking controversy.

Yesterday Mr. Greenberg revealed that ACE had paid out approximately $61 million in PSA compensation globally in 2003, of that some $38.5 million was paid to Marsh, with about $21 million of that being in the US.

Mr. Greenberg did not give any indication of what ACE had paid to date in 2004 in the controversial PSA payments, which have now been suspended.

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Tomorrow: ACE still on track to reveal analysis in the fourth quarter from independent and internal reviews of its asbestos reserves.