Insurers' reserves 'low'

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Leading UK insurance companies may have difficulty in paying insurance claims, said the Institute of Insurance Brokers yesterday, writes John Moore.

According to Andrew Paddick, the institute's director-general, a survey carried out by his organisation, which represents 950 insurance broking members, indicates that 17 of 70 leading insurance companies have lost their free reserves or shareholders' funds in less than two years in spite of periodic injections of new capital. Some of them indidividually showed a more serious decline, according to the institute.

'Such a situation leads to doubts about future claims paying ability,' said Mr Paddick.

The survey has already caused criticism in the City and anger among the 17 companies analysed. One company named is asking its lawyers to study the press release put out by the institute, and many are claiming that the analysis is flawed.

The institute was formed in the last few years as a breakaway movement from the better established British Insurance and Investment Brokers Association.

Steven Bird, a leading insurance analyst with Smith New Court, said the new study by the institute was 'sabre-rattling'.

'What they are saying might have been true six to nine months ago when there was little sign of recovery. But there are signs of recovery now and insurers have taken steps to rectify the situation.'