Ex-Churchill managing director John O'Roarke's £80m start-up insurance venture has hit the rocks after its financial backer decided to buy an established insurer instead.
According to sources, the equity house told O'Roarke's team that its proposition of launching a new motor and SME business insurer in such a competitive market was unlikely to succeed.
"It seems the venture capitalist has its eye on an insurer with a customer base of 500,000 to one million policyholders," said a source. Possible targets in this category include Hastings Direct, the UK operations of Groupama and MMA.
A senior investment banker said: "Start ups in the personal lines space are very risky unless there is a glaring process advantage.
The O'Roarke venture may claim to have this, but it is unclear what it amounts to and the funder was obviously unconvinced.
"The proposal could be that O'Roarke should reverse into an existing carrier with a customer base readily available. Such carriers, with shareholders open to such overtures, are low on the ground if not a pipedream," he added.
O'Roarke's team comprised his old colleagues: Phil Bunker, former managing director of NIG; Peter Horton, former group operations director at Churchill; Paul Cassidy, former group company secretary at Churchill; and Steve Castle previously group finance director at RBSI and Direct Line.
Three main strands were to make up the company - an online brand targeting the direct motor and home sector; a high street broker business in both personal lines and SME; and partnership businesses.
Banking sources said this volte face by the equity firm did not signal a sea change in private investors' attitudes towards insurance-related start-ups.
One analyst said: "This is merely a realistic appreciation that start-ups in this area of insurance are very high risk, unless they have a tangible USP [unique selling point]."
Neither O'Roarke nor members of his team were available for comment.