UPDATE 3-Hartford Fin'l settles Conn. price-fixing charges

* Hartford to pay $1.3 mln in antitrust settlement

* Connecticut AG calls accord first of its kind

* AG says Hartford aids case against Marsh's Guy Carpenter

* Hartford shares rise (Adds Guy Carpenter comment, updated shares)

NEW YORK, Oct 22 (Reuters) - Hartford Financial Services Group Inc (HIG.N) will pay $1.3 million to resolve charges that a former reinsurance business engaged in illegal price-fixing, Connecticut Attorney General Richard Blumenthal said on Thursday.

Blumenthal called the accord the first antitrust settlement of its kind in the reinsurance industry. He said it arises from his multiyear probe into unlawful practices in that industry, including "pay-to-play" schemes and price collusion.

The case relates to Connecticut's 2007 lawsuit accusing Marsh & McLennan Cos Inc (MMC.N) reinsurance broker Guy Carpenter & Co of conspiring with dozens of reinsurers to inflate costs for insurers and consumers by as much as 40 percent over several decades.

Blumenthal contended that Hartford participated in several of the conspiracies through its HartRe unit between 1986 and 2001. Hartford quit the property and casualty reinsurance business in 2003.

A Hartford spokesman said the company was pleased to settle, and did so to avoid future legal costs.

A Guy Carpenter spokesman said the company still considers Blumenthal's allegations unfounded, and that the various transactions at issue are lawful and "result in improved terms and pricing" for small- and mid-sized clients.

Blumenthal contended that Guy Carpenter enlisted Hartford and other companies in pay-to-play schemes, in which it funneled lucrative business to select reinsurers in exchange for excessive fees and other benefits.

Hartford "was forced to accept Guy Carpenter's anti-competitive terms in order to have any access to the business," Blumenthal's office said.

The attorney general said Hartford cooperated with his probe from the beginning, and provided information for an expanded lawsuit filed this week against Guy Carpenter.

Hartford is based in Hartford, Connecticut, and Marsh in New York.

In afternoon trading on the New York Stock Exchange, Hartford shares rose 84 cents, or 3.2 percent, to $26.78; Marsh shares rose 64 cents, or 2.6 percent, to $25.18. (Reporting by Jonathan Stempel; Editing by Gerald E. McCormick, Steve Orlofsky and Carol Bishopric)