Royal & SunAlliance this week admitted it had made an "unfortunate error", in contacting 800 intermediaries to tell them their agencies would be terminated.

Last month, the engineering wing of composite insurer sent out 1,100 letters to brokers, which read: "We are currently reviewing our agency database through an assessment of the value of business transacted by each agency.

"Our policy is to maintain only those agencies which transact in excess of £20,000 per annum in engineering premiums."

The letter gave the intermediaries 30 days notice of agency cancellation.

But this week, head of corporate communications Paul Atkinson claimed that an error on RSA's databases had caused the 800 letters to be sent out.

He said: "Basically, what happened is we wanted to reduce the number of smaller accounts where intermediaries had small engineering accounts and little else. We are a very large organisation and have a large database of customers and intermediary contacts and it was not properly up-to-date."

RSA said it has apologised to all the brokers and intermediaries who had received the letter in error.

Atkinson refused to comment on speculation that the letters were part of a wider plan by RSA to cancel the agencies of all brokers and intermediaries with accounts worth £20,000 or less.