Royal & Sun Alliance was last night on the verge of clinching a deal to bale out the majority of policyholders with Independent Insurance, the collapsed insurance firm. News of the deal emerged as the Serious Fraud Office launched a formal investigation into the corporate disaster, described by liquidators yesterday as the worst "since Maxwell".
Dan Schwarzmann and Mark Batten, the PricewaterhouseCoopers partners now in control of the company, said they expected a deal to be done by this morning to allow the "seamless" transition of three-quarters of Independent's policyholders to RSA. Other policyholders and creditors might have to wait at least a year to receive payouts under a so-called "scheme of arrangement".
The business which RSA is taking on consists mainly of home contents insurance for council tenants, which involves the regular payment of small premiums. "It's a particularly good scheme of business if we can obtain it on the right terms," a spokesman for RSA said last night. RSA is not paying for the business.
It was unclear whether RSA would also assume responsibility for claims that have already been submitted by the policyholders it is set to adopt.
The revelations came at the end of another day of twists and turns. Class Law, an organisation specialising in class actions, is thought to have told a meeting of brokers to Independent Insurance that it might bring a case against the company's directors and advisers, as well as the Financial Services Authority and Department of Trade & Industry.
However, PwC, appointed as provisional liquidators on Monday, said it had yet to open the investigation into the circumstances of Independent Insurance's collapse. For the time being, it is concentrating on securing the company's assets and offloading liabilities.
"We want [policyholders] to come off risk so our liabilities don't increase," said Mr Schwarzmann, urging Independent Insurance's policyholders to seek alternative cover as soon as possible. His team had spent "nil hours" speaking to Michael Bright, the company's flamboyant former chief executive. "We know where Mr Bright is but we are particularly keen to speak to [other] staff who are in situ," said Mr Batten.
An initial valuation of the company's assets ran into "tens of millions", although neither partner would indicate the scale of Independent Insurance's liabilities. Estimates range as high as £1bn.
Mr Batten hinted at the existence of Independent Insurance's "alleged reinsurance contracts" that are thought to be a key factor in its collapse. "We've seen plenty of bits of paper," he said. "It's clear the company's insolvent. If it had carried on it would have run out of money in a matter of months." Mr Batten described the disaster as the worst "since Maxwell".
The prospects for Independent Insurance's 2,000 employees remain uncertain. PwC said it hoped to tell staff by the end of next week whether they would be made redundant.
It is understood that some staff left yesterday with two months' salary. One employee said: "The atmosphere here is sick. It's tragic. There are people from the liquidators everywhere and they seem to have lost their sense of humour from the day they were born."
Sir Ian Noble, one of the company's non-executive directors, admitted the claims records at Independent "were not quite as good as they might have been", although he believed the company was solvent.
"I'm not tremendously keen on opening the Pandora's box for everyone to inspect," he said, speaking from a wine and whisky trade fare in Bordeaux. "I know it's a terrible tragedy for people whose jobs are on the line, and for shareholders. Hindsight is a wonderful thing. If we had done a thorough investigation of the claims a year ago, it might have come out."
Pizza Express, the McLaren Formula One racing team, and the London Fire Brigade rank among Independent Insurance's customers.Reuse content