Marsh & McLennan Cos. (MMC), the world's largest insurance broker, on Tuesday said it will reform its business practices and stop accepting fees that New York's attorney general said amounted to bid-rigging.

The changes were announced one day after chairman and chief executive Jeffrey Greenberg (search) resigned under pressure and Marsh learned it would not face criminal prosecution by the attorney general, Eliot Spitzer (search), over the fees.

Marsh also created a compliance unit to oversee brokers and said it will fully disclose commissions and fees to clients.

Spitzer accused New York-based Marsh in an Oct. 14 civil lawsuit of rigging bids and colluding with American International Group Inc. (AIG) and other insurers to fix prices. A spokesman said Spitzer might prosecute individual Marsh employees, but had no comment on the planned reforms.

Michael Cherkasky (search), Marsh's new CEO, said the company will by Jan. 1 permanently ban the "contingent compensation" fees that insurers pay to brokers in exchange for more business. The fees totaled $845 million in 2003, or 7 percent of Marsh's $11.6 billion of revenue. Marsh's profit that year was $1.54 billion.

"Marsh dodged a bullet by avoiding criminal charges, but economically the company is not out of the woods," said David Havens, a fixed-income research analyst at UBS AG.

Cherkasky, once Spitzer's boss as the New York County district attorney's investigations chief, on a conference call pledged to work with the attorney general to settle the civil lawsuit, though he has no meetings scheduled. Spitzer had said he would not negotiate with Greenberg.

Cherkasky also said he believes "very, very, very few" clients might have suffered from price-fixing, and that Marsh plans to complete an internal review this year. He said "there have been suspensions at Marsh, and there has been a firing," but did not elaborate.

"This is going to be a tough period for us but, net-net, good," said Cherkasky, who still runs Marsh's risk and insurance services unit.

Spitzer has expanded his probe to life and medical insurers, and an official in his office said Spitzer may sue Marsh rival Aon Corp. over its business practices.

Shares of insurers and brokers rose on Tuesday after the threat of criminal charges against Marsh was removed. New York-based AIG, the world's largest insurer by market value, is run by Jeffrey Greenberg's father, Maurice "Hank" Greenberg.

"The big fear was that Marsh would be criminally charged, and that AIG could perhaps be next in line," said Wayne Bopp, an analyst for Fifth Third Investment Advisors in Cincinnati. "You're taking the death sentence off the table for the brokers, and that's just huge."

In afternoon trading, Marsh shares rose $2.16, or 8.2 percent, to $28.58. AIG shares rose $3.76, or 6.7 percent, to $59.86, and Aon shares jumped $1.63, or 8.3 percent, to $21.27.

Marsh said its new global compliance division will report to Cherkasky and the audit committee of the company's board of directors.

Other changes include submission of quarterly compliance reports, ethics training for employees, and creation of an internal compliance and ethics "hotline."

Marsh delayed reporting third-quarter results to Nov. 9 from Oct. 27.

Cherkasky said morale has declined at Marsh, where the declining stock price has cut into retirement holdings of many employees. "There is a lot of anger and unhappiness, but we as a management team are going to deal with (it)," he said.

Havens of UBS AG downgraded Marsh bonds to "hold" from "tactical buy" after they rallied upon Greenberg's resignation. He said Marsh will face "an unpleasant adaptation to a lower revenue environment, and it will happen quickly."