Cox will drop the Highway brand and offer the management team jobs in the wider organisation.

But, according to market sources, only Highway underwriting, sales and marketing director Chris Hill will join. It is understood he could be in line to join Lloyd's underwriter Ray White at Syndicate 218, which is backed by capital provider Equity Red Star. Its capacity for 2004 is £433m.

But rumours that Hill may replace White were denied by sources close to Equity Red Star. "With Ray's track record, it would be inconceivable for Cox to replace him."

A Highway spokesman said: "Any speculation surrounding Chris Hill's future appointment as underwriter of Equity Red Star is precisely that - speculation - and no more. In view of Stock Exchange regulations governing any takeover bid, further comment would be entirely inappropriate at this stage."

Hill, along with Highway's executive management team, including executive chairman Ross Dunlop, chief executive Andrew Gibson, finance director Ian Patrick, and operational director Stuart Davies, will all walk away with "a few hundred thousand pounds each" from the share-for-share takeover.

"The idea behind Highway was to make some money and sell out. I imagine they will all want to go and do new things, maybe even start up another underwriting agency," said a market source.

Cox reiterated this week that discussions were continuing and the insurer was in a period of due diligence. Speaking to Insurance Times last week on the announcement of its results, Cox Retail chief executive Neil Utley said he would not comment specifically on the deal. But he denied any suggestion that Cox would buy Highway as a way to exit Lloyd's.

He said: "It is true that it is expensive to do business in Lloyd's. But it is an exciting market and Lloyd's has been very kind to us since they ring-fenced our liabilities two years ago."

The deal is estimated to be based on offering one Cox share for two new Highway shares at around 48p. Highway's trading price was 39.7p as Insurance Times went to press. If successful, Cox would become the fifth largest motor broker, worth £400m.