Rumours that Zurich Financial Services is preparing to buy Royal & SunAlliance have received a cool reception from brokers, writes Mike Cooper.

Broker representatives fear a reduction in choice and a cut in the number of broker agencies.

The Swiss-owned insurer is thought to have retained insurance experts from Morgan Stanley Dean Witter to advise on the feasibility of a £6 billion merger with RSA.

However, Zurich has steadfastly refused to comment on whether it is planning a bid for RSA or confirm links with the US investment bank.

If Zurich and RSA were to merge it would create a giant with a gross written premium income of approximately £5.7 billion, a combined staff of 20,000, and a client base of around 30,000 insurance intermediaries.

Mike Slack, AiiB chairman, said previous mergers had reduced choice for intermediaries. But he sees another merger in the UK insurance market as almost inevitable.

Mike Williams, BIBA chief executive, said there would be overlaps between the operations if they did merge and this might lead to rationalisation in the number of agencies.

"Recent history shows when two insurers get together they look hard at their intermediary base," he said.

Williams said Zurich went through a process of scaling back its broker channel after its Eagle Star merger.