NIG has failed to find a buyer for its Special Risks division and will put it into run-off at the end of 2003.

With gross written premium of £360m in 2002, Special Risks is the largest of NIG's div ...

NIG has failed to find a buyer for its Special Risks division and will put it into run-off at the end of 2003.

With gross written premium of £360m in 2002, Special Risks is the largest of NIG's divisions.

A NIG spokeswoman said: "NIG has decided to withdraw from the special risks market at the end of the year. The brokers have received letters notifying them of the decision.

"NIG will be honouring existing arrangements until the run-off of the schemes."

Insurance Times first revealed the troubles on 28 August 2003.

Composite Legal Expenses has a binding authority from NIG, but managing director John Mullin said he had not heard about the decision. "We have a six-month notice period built into our binding authority."

NIG's special risks portfolio includes motor vehicle insurance, such as mechanical breakdown warranty and GAP insurance, home and roadside assistance, creditor (including mortgage and income protection), small premium property schemes and legal expenses.

Through its involvement in legal expenses, NIG was one of five insurers, along with Catlin, Allianz Cornhill, Atrium and GoshawK (see box), with a large exposure to The Accident Group (TAG).

TAG has now been put into liquidation.

Market sources estimate NIG's TAG exposure at £100m. But speculation has arisen over the liability for this loss.

According to industry sources, NIG's former owner, Credit Suisse, "ring-fenced" the TAG liability, so it was not transferred to the Royal Bank of Scotland (RBS).

The banking group acquired NIG along with Churchill.

Both RBS and Credit Suisse's insurance division, Winterthur, declined to comment on their liability.

Big losses for Goshawk

GoshawK announced dismal first half results showing the risk of entering new classes of business.

The group saw its bottom line collapse as a result of two main areas.

Losses from contingent cost insurance (CCI), or viatical business, required reserves to be increased to £38.1m.

This represents losses of 150% of premiums written but consultant Tillinghast, which carried out an actuarial review, warned that they could ultimately reach between 144% and 383%.

Exposure to the collapse of The Accident Group (TAG) was also uncertain and depended on factors including the failure rate of TAG's customers' cases and disputes between TAG and its insurers.

Chief executive Chris Fagan admitted the group's wholly owned Syndicate 102 entered the sectors without reinsurance.

Topics