Zurich puts forward rescue plan for MMI

ZURICH INSURANCE, one of Europe's largest insurers, has stepped forward as a potential saviour of Municipal Mutual Insurance, the troubled company that has been forced to stop accepting new business.

If Zurich decides to proceed, it will acquire MMI's main council insurance business together with the car and home insurances of local authority employees. Zurich plans to take over MMI's systems and staff, which could save the jobs of perhaps 1,500 of the group's 2,500 employees.

MMI has already suffered the collapse of one proposed rescue, when the French insurer La Garantie Mutuelle des Fonctionnaires pulled out two weeks ago. GMF lost interest in MMI during the 10 weeks it had to study the company's books.

The finance union MSF and the local authority associations cautiously welcomed the news of Zurich's interest.

Tony Whiteley, national officer of MSF, said MMI was suggesting that 'Zurich will have learnt whatever lessons need to be learnt from the GMF fiasco. They knew what they were getting into. They would not be going so public if they did not feel they were going to proceed.'

MMI lost pounds 240m last year and its accounts were heavily qualified by Coopers & Lybrand.

Zurich expects to be able to decide whether to proceed with the deal in the next few weeks. Dennis White, Zurich's UK chief executive, said: 'There are still a number of issues, but subject to these being resolved we shall be able to offer insurance cover to local authorities on realistic terms before the year-end.'

Zurich is keen to expand in the UK. It is currently about the 15th largest general insurer, with 2 per cent of the market. A spokesman said MMI offered a strategic opportunity to take on a significant volume of business.

'What we are essentially looking to achieve here is a degree of continuity for local authorities but with a different insurer behind MMI,' the spokesman added.