Well before New York State Attorney General Eliot Spitzer's allegations last month of serious wrongdoing at Marsh & McLennan Cos. there were indications of turmoil within the ranks as several groups of brokers bolted to rival firms.

As recently as August, broker groups from San Diego to Denver had been leaving the world's largest insurance brokerage in what industry sources say were a series of notable defections.

It's not possible to pin all the departures on the questionable practices at Marsh that were flagged by Spitzer. But at least some have been linked to one practice that has drawn his attention: the funneling of business from local offices to the company's New York headquarters, where it was handled by its Global Broking unit.

That practice took the placement of business with carrier underwriters out of the hands of local brokers who dealt with clients face-to-face, something that increasingly irked brokers, said one who left Marsh for a rival firm.

"You promise your clients you will do everything you can for them," said the broker, who asked his identity not be disclosed. "It's pretty hard to do that when the process is to go to this separate unit and you lose control."

Notable defections began in September 2002 with the departure of almost a dozen brokers from a San Diego Marsh office to a new office that Lockton Cos. Inc. established in the area. This August, nearly a dozen brokers left Marsh's Newport Beach office and helped set up an Irvine presence for McGriff Seibels & Williams, a Birmingham, Ala.-based brokerage seeking to expand on the West Coast.

In between, Willis Group Holdings, the large London-based multinational brokerage giant, took groups of Marsh brokers in the Denver and San Francisco markets.

Los Angeles was spared major defections, sources said, likely because the office has a large number of senior brokers who would be less likely to make such a move late in their career.
(Last week, two employees of Harford Financial Services Group Inc., accused by Spitzer of bid-rigging with Marsh brokers in L.A., were fired by the insurer.)

Brian Sullivan, an insurance industry expert and editor of Property Insurance Report, cautioned against reading too much into the departures, noting that insurance brokers often change employers. Even so, he said, the string of defections was notable.

"That's a long list," he said. "It's not like a bunch of new (managers) came in and changed the way they operated."


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