Troubled insurers fail to attend talks: The position of the MMI group is unclear, write David Connett and Paul Durman

CONFUSION surrounding the fate of Municipal Mutual Insurance, one of Britain's largest general insurance groups, deepened yesterday when officials failed to attend a meeting in London with local authority association leaders.

MMI claimed that rescue talks aimed at saving the company were at a sensitive stage and confidentiality was essential. It informed local authority associations by fax of its decision not to attend shortly before the meeting was due to begin.

The associations, nine out of ten of whose members face large debts if MMI collapses, said clarification of the situation was in the public and policy holders' interests and they would continue to seek talks with MMI. 'Our concern is to protect the interests of more than 400 local authorities whose insurance is handled by MMI. We would all welcome a successful outcome of the negotiations if they protected those interests,' a spokesman said.

Brian Wright, the chief executive of MMI, insisted again yesterday the rescue talks between MMI and La Garantie Mutuelle des Fonctionnaires (GMF), the French insurer to which MMI has turned for help, were continuing despite a second day of contradictory statements from the Paris-based company. He is expected to fly to Paris today.

Mr Wright has assured senior management at Cheltenham & Gloucester Building Society and the Automobile Association's insurance arm - both of which have hundreds of thousands of policyholders with MMI - that talks with GMF were continuing.

But GMF continued to insist the deal was off. An exasperated spokeswoman said yesterday: 'GMF is not interested any more by MMI. It is very clear. It is a very difficult situation for MMI. Everybody is very nervous about MMI.' MMI's spokesman could not explain why the two companies appeared at odds.

Experts believe MMI may be hoping to find a saviour among the other members of Eurosafe, the loose European insurance consortium headed by GMF's president. Societe Mutuelle des Administrations Publiques, a Belgian company, looks to be its best hope.

Both Cheltenham & Gloucester and the AA continue to place business with MMI. They say they draw comfort from the fact the Department of Trade and Industry continues to allow MMI to trade.

An AA spokesman said: 'We don't think the matter is as dangerous as it appears. We are unlikely to see a repeat of the Vehicle & General crash of 1971. The DTI would do their utmost to prevent that happening.'

Cheltenham & Gloucester, saying it believed it was being kept accurately informed by MMI, said it would make sure that more than 250,000 policyholders would not be left 'bereft' if disaster struck the insurer.

The Consumers' Association called on the Government to issue a 'definitive statement' on MMI's future.

Jean Eaglesham, the association's head of money policy, said: 'The DTI has allowed MMI to trade below agreed solvency margins, pending possible rescue by the French consortium Eurosafe. If, during that time, MMI's financial position has worsened, then the DTI's equivocation could mean that individual policyholders will lose out, since there will be less money in the pot for creditors.'

(Photographs omitted)