Cox to raise £70m for new car insurer

Cox, a distressed Lloyd's of London insurer, is to raise £70m through a share placing to launch an insurance vehicle which will not be liable for any of Cox's massive losses.

Cox, a distressed Lloyd's of London insurer, is to raise £70m through a share placing to launch an insurance vehicle which will not be liable for any of Cox's massive losses.

The move, announced yesterday, comes after Cox said last month that it was winding down its commercial business, after it suffered losses from the 11 September terrorist attacks that it believes could be as high as £125m.

Lloyd's has agreed an innovative deal with Cox that allows it to ring fence its losses in its old commercial and retail car insurance business. Cox says it has enough capital to cover these liabilities.

The ring fencing arrangement enables Cox to guarantee to subscribers to the share placing that their money will only be used to fund the new business, which will also be in car insurance.

Cox has appointed a new non-executive chairman. Peter Owen, already a non-executive director, was chief executive of PPP Healthcare and a director of Guardian Royal Exchange, now part of Axa. Mr Owen said: "The group has been devalued by issues on the commercial side – the good performance on the retail side has been hidden under a cloud."

Cox's shares jumped 1.5p to 42p. It has lost four-fifths of its value in recent months as it increased its estimate of liabilities from 11 September from £42m to £125m.

Cox's car insurance business has been profitable for the 40 years of its existence. But the quality of underwriting on the insurer's commercial side, which includes nuclear and aviation business, has not been well regarded.

Cox is winding down its old retail business and starting a new one because the old one is also liable for outstanding losses. The new business, which will also be underwritten through Lloyd's, is expected to attract gross premiums of about £205m when it starts trading in June.