A pool of large regional brokers are discussing the feasibility of an offshore captive to tackle the professional indemnity (PI) crisis.

It is understood a captive management company in Guernsey has been approached.

Joint managing director of broker Stuart Alexander, Stuart Reid, confirmed that his company was in talks with the industry's larger brokers about the idea.

Reid said: "As Stuart Alexander has grown, the company's PI premiums have risen disproportionately to that growth. This is so much the case that we envisage our PI renewal in 2003 could cost in excess of 5% of our total commission income.

"One solution might be that the broking industry itself set up a captive for the primary layer and then looks to the open market for the excess layers," said Reid.

He added that the broker was interested in applying for Lloyd's membership in the future, but the lack of adequate PI cover might scupper the plans.

Reid said: "The main consideration for us has become the price and availability of PI cover needed to join."

Another broker involved in the talks, who wished to remain anonymous, said the "cost of cover is now outweighing the exposure to claims".

"To be honest it has got to the stage where I don't want to make a claim, which means the premium will never be used," he said.

It is understood the average premium to join the scheme would be between £500,000 and £1m.

Reid said that the problems seen in the liability market could be mirrored in the broking industry, leading to brokers trading without cover.

"Where companies are faced with such large increases, they could choose to trade with either unmanageably high deductibles, to reduce their limits to the minimum required or even, pre-FSA, trade without cover at all."