Property and casualty insurance company Ace Ltd. settled a bid-rigging and accounting probe brought by investigators in New York, Connecticut and Illinois, agreeing to pay $80 million in restitution and penalties.

New York Attorney General Eliot Spitzer said in a statement that Ace will pay $40 million to policyholders, while another $40 million in fines will be awarded to the states. Spitzer also said that Ace agreed to reform its practices and issue an apology.

Spitzer announced his probe of Ace in 2004, alleging that the company was among insurers that colluded with broker Marsh & McLennan Cos. Inc. In January 2005, Marsh & McLennan paid $850 million to settle an investigation into claims of bid rigging, price fixing and the use of hidden incentive fees.

As part of a separate state and federal investigation of the industry's accounting, last July Hamilton, Bermuda-based Ace said that it would restate five years of financial results after an internal investigation into its reinsurance contracts. Reinsurance is taken out by insurance companies to protect them from the risk they assume when writing traditional insurance polices.

Ace chief executive Evan Greenberg said that the settlement was a "major step in achieving closure and finality to what has been a difficult two years for our company and the industry." Greenberg's brother, Jeffrey, resigned as chief executive of Marsh & McLennan after Spitzer sued the company in 2004. Their father, Maurice "Hank" Greenberg, was removed as chief of insurance giant American International Group Inc. last year after Spitzer filed civil fraud charges against him.

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