The broking profession has given a thumbs-up to The Underwriter Insurance Company, the new company created by ex-Independent directors and Mr Direct Line himself, Peter Wood, which has just won FSA approval to underwrite in the London market.
The new firm, which will write commercial business only, will be fully operational with £50 million of financial backing from the merchant bank Morgan Stanley Dean Witter) by November1.
Conservative estimates for premium income are said to be around £100m annually within the next five years. That would make The Underwriter one of the UK's top 50 general insurance companies in today's rankings.
Members of the broking profession hope it will mark a turning point in the recent history of insurer consolidation.
The IIB's Andrew Paddick said: "There is no question about it – the individuals are experienced, solid market players.
"With all these mergers and acquisitions a vacuum has been created. The move will give concern to the big, newly-merged companies which are not properly organised. Somebody coming in with a clean sheet shouldn't have insurer service standards problems that Biba's Simon Bolam made sweeping comments about recently."
At The Underwriter's helm are some of the insurance industry's top executives. These include ex-Independent men Robert McCracken and Keith Rutter chairman and chief executive respectively.
Peter Wood, who was the brains behind Direct Line, is a non-executive; ex-Privilege Insurance director, Frank Kirwan is also a non-executive director.
Rutter said: "We have no legacies in terms of systems or old liabilities. Our view is that consolidation of the underwriting market is an advantage to us, because we can give some choice back to brokers.
"We also view the possible up-lift in the market to be an added bonus, although it is not something we had planned on."
Rutter said that the new company already had "five or six" underwriters on board and, following the FSA's approval, a recruitment drive will now start for more.
The Underwriter will underwrite all types of general commercial insurance risks although its key areas are expected to be construction, leisure and product liability.
Rutter has stated that his company will only take business from "selected brokers", believed to number around 40.
Peter Dredge, who is a director of Lloyd's broker Alfred Blackmore, welcomed the news. He said: "We would give it support. We have quite a useful construction account and that is one of the areas they are looking at.
"Keith Rutter is an experienced construction underwriter and it's a fairly small market. He is the sort of underwriter we have got confidence in. He gets involved in the whole market, and will help if there is a problem. With some of the bigger underwriting firms, you can't talk to the underwriters about claims."
The city has also gave the venture cautious backing. Analyst Chris Hitchings from Commerzbank said: "It depends on how good their business plan is. We are getting towards the bottom of the cycle and that is the right time to get in, so yes it is a good move. But it really does depend on their business plan."
Another Lloyd's broker, Senior Wright, also welcomed the news. Office manager Ray Hamilton said: "We welcome a major new player in the market and hope it will enable us to strengthen the best terms we offer to our clients."
Loss adjusters for the new firm include Beechams, Quest/Gates, and McLarens. Among The Underwriter's solicitors are Beechcroft Wansborough and Berrymans.
The Underwriter will operate using Synergy from Eurobase, with implementation to last three months, the contract for that deal was worth £540,000.
Independent chief executive, Michael Bright, wished his old charges well. He said: "Keith and Robert were senior managers and director of Independent Insurance Group during its early and developing years – a period of very significant growth and excellent profits. We hope they do as well for themselves in the new venture as they did for us."