IBM has sealed a $200 million (£125 million), seven-year contract to provide IT outsourcing services to CGU's UK general insurance arm.

The deal represents a renegotiation of a ten-year contract the technology giant struck three years ago with General Accident prior to its merger with Commercial Union.

Under the original contract, IBM had responsibility for GA's personal lines administration system in Perth, its desktop network, its application maintenance and improving its legacy systems. That contract resulted in 300 GA staff transferring to IBM.

As part of the renegotiation, all CGU's personal lines business will pass through the Perth operation.

IBM director of insurance services Malcolm Carter said: "A lot of people worry about whether it is sensible committing to long-term partnerships. This is the second or third time we have been involved with an insurer that has merged to form a bigger organisation."

Carter added: "CGU has much-changed objectives, but we have shown the necessary flexibility to provide the services it needs."

At the moment, CGU still possesses a number of in-house IT operations – such as its commercial lines datacentre in Whyteleafe, Surrey.

However, a spokesman for CGU said it had no plans to outsource that operation at this time.