Allianz Cornhill has flatly refused to comment on reports that it is poised to sell its Lawclub Legal Protection division to German legal expenses insurer Arag.

A spokeswoman for Allianz Cornhill said: “We are unable to comment on market speculation.”

Dusseldorf-based Arag hit the headlines this week with its innovative form of legal cover for recovering the costs of divorce proceedings.

Allianz initially spurned market rumours that it was looking for a buyer for Lawclub in January 2001.

The Bristol-based legal expenses insurer, which has 55 employees and sales of £18m, refused to confirm or deny the reports.

Despite being overshadowed by its larger Bristol neighbour DAS, Lawclub has successfully carved out a niche in the legal expenses market.

It has sealed large-scale affinity accounts with, among others, National Accident Helpline.