A group of 11 insurers agreed Thursday to pay JP Morgan Chase & Co. nearly $654 million of the $1.1 billion it lost through natural gas trades that were defaulted on by Enron Corp., according to the bank’s lawyer.

In addition to the settlement payment to the banker, the agreement allows the insurers to sell JP Morgan their pending bankruptcy claims against Enron. The agreement will reduce the total insurance payment by 13%, JP Morgan said. After taxes, the settlement will cost JP Morgan about $260 million in the fourth quarter, said CEO William Harrison. Another $600 million also will be set aside for the other legal matters involving Enron, including $80 million to pay the costs of settling with federal and state regulators about biased stock research.

A jury was set to begin deliberations in the case, which began in early December. According to JP Morgan, the insurers approached the bank on New Year’s Eve to discuss an out-of-court settlement. The nation’s second largest banker had filed a lawsuit last year seeking $1.1 billion from the insurance companies, which in turn countersued, claiming they were deceived into backing trades disguised as loans between JP Morgan, Enron and the bank’s offshore entity, Mahonia Ltd. (see Daily GPI, Jan. 2).

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