Norwich Union expects the collapse of Independent Insurance will cost it up to £100m.
At the presentation of its results for the six months to June 30, 2001, CGNU – Norwich Union's parent company – announced it was putting £14m aside for a cash call that will come from the Policyholders' Protection Board (PPB).
The PPB will call for cash from general insurers to pay policyholders who are owed money by Independent.
Patrick Snowball, head of CGNU's general insurance business, said this was just the first tranche of payments which Norwich Union expected to make to the PPB.
A source close to CGNU's board said the insurer was expecting the final cost to be up to £100m.
Snowball told Insurance Times: “The Independent collapse has been a PR disaster for the industry. It looks as though we don't know what we are doing.”
He added: “We are paying for the mistakes of Independent and others that have failed. In the end, it hurts our policyholders.”
“We are concerned at the size of the levy. It will be a significant figure in the end.”
Royal & Sunalliance (R&SA), which posted its interims on the same day, said it had reserved a similar amount to Norwich Union pro rata. It is understood the figure is £7m to £8m.
CGNU's general insurance pre-tax profits rose to £427m for the six months to June 2001, from £161m in the same period a year ago.
The CGNU group's pre-tax profits rose to £977m from £679m over the same period.
The group continued to lower its exposure to commercial risks. UK commercial premiums fell from £883m in the six months to June 2000 to £836m in the same period 2001.
Norwich Union's UK homeowner premiums fell to £531m from £618m. Snowball said this was due to losing the Nationwide Building Society's account.
Snowball added some business had been lost because every CGU motor and home policy had been rebroked since the merger of CGU and Norwich Union in March 2000.
“We had 350 products and now we only have 68. That has meant rebroking many policies,” he said.
R&SA's pre-tax profits rose to £375m in the first six months of 2001, from £320m in the same period 2000.
R&SA's general insurance premiums for that period rose to £4.5bn from £4.3bn – a rise of 5%.
