Insolvency report sparks legal challenge

THE INDEPENDENT Insurance group yesterday started legal proceedings against the Institute of Insurance Brokers following assertions earlier this week that the group's solvency, along with the solvency of 16 other large insurance companies, has been dramatically eroded over the past two years.

In one of the worst rows in recent times between an insurance group and a brokers' body, Independent said that remarks made this week by the institute suggested that it was not financially secure.

Other companies among the 17 named have also consulted lawyers about their inclusion in the institute's list, which has been widely criticised by independent City analysts.

The 950-member institute, which is trying to market a survey based on its statistical analysis at pounds 720 a year, was formed as a breakaway movement from the British Insurance and Investment Brokers Association.

Robert McCracken, a director and assistant general manager of Independent, said yesterday: 'The comments made by Andrew Paddick (the head of the institute) and the institute were totally unjustified as far as Independent Insurance is concerned.

'We are a company dedicated to the broker market, and so are astonished at what has happened, particularly in view of our close relationship with the institute and its members.'

Independent, established in 1987, said Mr Paddick had issued a retraction. 'We now trust our brokers and clients will immediately disassociate us from this sorry affair.'

The institute had asserted that its survey of 70 insurance companies suggested that 17 insurance companies had collectively lost half their free reserves (shareholders' funds) in less than two years.

The institute said the losses had occurred in spite of periodic injections of new capital.

'Some of them individually showed much more serious decline,' the institute added.

The institute has 950 insurance broking members.