Brokers fear new owner could cut off £250m financing from third largest provider.

The premium finance arm of Kaupthing Singer & Friedlander is to be sold by its parent company following a major restructuring.

Kaupthing Singer & Friedlander Premium Finance, the UK’s third largest premium finance provider, is owned by Icelandic-based Kaupthing Bank. It has provided about £250m worth of funding to brokers.

The sale, which is expected to take up to four months, is part of a larger restructuring that sees Kaupthing Singer & Friedlander’s asset finance and commodity trade finance divisions – considered non-core businesses – sold off in a move that could free up liquidity in excess of £1bn.

In a letter to brokers, Bob Darling managing director of Kaupthing’s premium finance arm, said: “As you would expect, the sales process will have absolutely no impact on this growth or the service that we provide you.”

But a market source said the impact of the sale on brokers was unclear. The source said: “No one knows who will own it in a couple of months. They [the new owners] could cut off the premium financing and refuse to lend to brokers, or it could become extremely expensive for brokers to borrow.

“Kaupthing can’t promise it will be business as usual because it is looking for the best deal it can get.”

In November, Darling told Insurance Times that Kaupthing’s premium finance division was focused on growth and taking on bigger deals with brokers.

A spokesman for Kaupthing said: “After the divestment there will no longer be any significant asset finance business within the Kaupthing group.”