Reinsurers challenged over withdrawal of unlimited third party cover

Motor insurers are set to mount a statistical challenge to reinsurers over unlimited third party liability cover.

It is understood that some motor insurers fear that they would have to pull back from the market if reinsurers continue to take a hard line on the provision of unlimited third party cover.

Swiss Re is one of the major reinsurers that has announced it will stop writing unlimited third party liability cover from January 2004.

The ABI motor committee has been discussing the issue with worried primary insurers and the Motor Insurers Bureau (MIB).

An ABI spokesman confirmed that the motor committee had begun "information gathering" with UK primary insurers to find out how bad the problem could be, but said the discussions were at "an exploratory stage".

Allianz Cornhill commercial motor and underwriting statistics manager Geoff Moylan admitted that some insurers might exit the motor market due to the lack of unlimited third party liability cover, although the chances of this were small.

Moylan said: "The ABI is working with the market and lobbying the government to find a sensible solution, which may involve the government capping unlimited liability to a sensible level or even picking up the excess themselves as a last resort."

A Swiss Re spokesman said: "Our group underwriting strategy is to move away from unlimited cover and that is the position we would be looking to adopt with regard to motor cover for the UK."

Reinsurers are nervous about providing unlimited reinsurance cover for motor insurers following the Selby rail crash in February 2001.

The Selby crash was caused when a train collided with a car that had crashed through a barrier on the M62.

The total cost to insurers and reinsurers of the crash has been estimated at £50m.

Fortis was liable for the first £1.5m of this, but its reinsurers, principally Munich Re, were liable for the rest.