Marsh said the settlement was a "significant step forward"

Under the agreement with New York attorney general Eliot Spitzer, Marsh said it "neither admits nor denies the allegations".

It will pay the money back over four years to affected policyholders.

Marsh's brokers were accused of taking payoffs from insurance providers in exchange for passing clients their way.

'Deep regret'

Mr Spitzer, who began investigating the matter last October, said the practice meant that corporate clients were denied the best prices for the policies they required.

Marsh's agreement is far from the end of the scandal, as Mr Spitzer made clear on Monday.

"There will be criminal cases coming in the near-term," he told the Reuters news agency.

"We are examining a number of other players in this sector, both brokers and carriers."

It is one of the largest restitution funds in history that we are aware of from a single company Eliot Spitzer, New York attorney general Check Marsh's share price

The agreements - also known as contingent commissions or placement service agreements - are above ordinary commissions which brokers traditionally receive from insurance companies.

"We deeply regret that certain of our people failed to live up to our history of dedicated client service," said Marsh president and chief executive Michael Cherkasky.

"The acts of these employees were inconsistent with the integrity and ethics on which this company was founded.

"Today's settlement is a significant step forward for Marsh... it removes a major uncertainty for the company and enables us to focus all of our attention on serving our clients."

Mr Cherkasky added: "We will set the standard for transparency and demonstrate Marsh's commitment to being the industry leader for ethical business practice and client service."

'Clean break'

Mr Spitzer said his office was "establishing new ethical ground rules for this industry".

"It is one of the largest restitution funds in history that we are aware of from a single company," he said.

"The company has embraced restitution and reform as a way of making a clean break from the practices that misled and harmed its clients in the past."

Several executives at Marsh either stepped down or were ousted during Mr Spitzer's investigation.

In November, Marsh said it would lay off 3,000 employees and it removed its then chairman and chief executive Jeffrey Greenberg.

Marsh will take a $618m pre-tax charge to fourth-quarter 2004 earnings for the settlement.