Norwich Union (NU) has declared it will maintain strict control over a £500m binding authority deal with Primary Group, after Royal & SunAlliance's (R&SA) capacity deal with Primary was terminated

Norwich Union (NU) has declared it will maintain strict control over a £500m binding authority deal with Primary Group, after Royal & SunAlliance's (R&SA) capacity deal with Primary was terminated

It emerged this week that NU had stepped in to back a capacity deal with Primary Group after R&SA's three-year binder deal with Primary ended abruptly – two years before it was due to end.

The move came amid accusations of poor underwriting scrutiny by Primary.

John Kitson, NU intermediary director, said: "We don't sign up to long term deals unless we are confident in the underwriting strategy and we can get returns.

"We will be hard on underwriting returns and watch the rates closely. We will pay close attention to results, and be clear and assertive on the underwriting strategy."

Primary had agreed a three-year binding authority deal with R&SA and AXA in April 2006 worth £500m.

The deal was anticipated to span three years with £120m gross written premiums expected in the first year.

Under the agreement, AXA supplied 62% of the capacity, while R&SA supplied 34%.

Under the new arrangement NU will underwrite 33% of the capacity for the binding authority which has been extended for a further five years and will be expected to generate £100m annually.

Primary insisted that the decision to end the relationship with R&SA was "mutual and amicable".

But sources close to R&SA told Insurance Times: "R&SA was really unhappy with the Primary relationship.

"Brendan [McManus] wasn't turned on by the volumes of business it was generating and the underwriting scrutiny was poor."

A Primary spokesman said its mid-term objectives had differed from R&SA's objectives. He said: "There were never any issues around pricing."

The five-year deal with NU, he said, was a straight swap. "We still have big ambitions to grow the company, but we understand that it is a soft market and that it is more difficult to do so at this time," the spokesman added.

R&SA will cease to underwrite any new business from 31 March 2007 and an "appropriate run-off" will take place, a statement from R&SA and Primary said.

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