Norwich Union (NU) could lose one of the largest home and creditor accounts in the market, if a bid by Halifax Bank of Scotland (HBOS) to buy Abbey is successful.

Market sources claim HBOS General Insurance is already preparing to amalgamate the home account, worth £300m in gross written premium, into its existing insurance portfolio.

The integration will depend on the success of a £10bn bid from HBOS, expected imminently.

One market source said: "If you look at the HBOS General Insurance model it is totally focused on keeping underwriting, administration and claims in-house. There is little doubt that if the HBOS bid for Abbey is successful NU will lose the account."

NU is understood to be half way through its five-year contract with Abbey to underwrite the home account, currently standing at 1.2 million policyholders.

The contract was drawn up in 2002 and is thought to contain both a review window in 2005 and a buy-out clause that could release the new owner from any contractual obligations to NU.

NU also underwrites Abbey's creditor account, which currently has 280,000 policyholders.

An NU spokesman declined to comment.

Capita Insurance Services, which administers the Abbey home business, would also be in line to lose its largest account if an HBOS bid was successful.

Capita employs over 400 people to service the multi-million pound account.

A market source said: "The Abbey business is Capita's flagship account."

Abbey's insurance business is widely considered to be the sleeping giant among the bancassurers, with an almost non-existent motor book and a home account that has not been exploited to the full.

A market source said: "There is a huge amount of potential in both the Abbey brand and the existing insurance business. It just needs the correct management."

Abbey, which is the UK's sixth largest bank, is currently considering a £8.75bn bid from Spanish bank Santander Central Hispano.

HBOS is the UK's fourth biggest bank.