Zurich Insurance has clinched a contract to underwrite professional indemnity insurance for the Medical Defence Union.

Under the deal, Zurich has paid £28m for a minority shareholding in MDU Services which, until recently, was a wholly-owned subsidiary of the MDU.

MDU Services is a leading provider of discretionary professional indemnity cover to public-sector doctors and dentists in the UK.

MDU chief executive, Dr Michael Saunders said: "The MDU has always been at the forefront of medico-legal developments.

"These are changing times: for the health service, the civil justice system and the regulation of practitioners.

"To meet these professional challenges our members, quite rightly, demand increasingly sophisticated services from us."

In the future, Zurich will try to reduce the discretionary nature of the MDU's professional indemnity service.

It will do so by providing GPs, dentists and consultants with more detailed information of risks they are covered against.

So far, although it has the right to provide PI on a discretionary basis, the MDU has never refused to cover one of its members in a legal case.

The MDU will retain the discretionary right to provide its members with PI, but Zurich's involvement will give greater clarity about what members are insured against. It is not known yet whether the method of charging individual members is likely to change as a result of the deal.

Zurich has provided reinsurance for the MDU over the past four years.

Zurich Re chief executive, Dirk Lohmann said: "This venture is in line with our group strategy to provide compelling convenient solutions tailored to specific affinity groups through strategic and marketing alliances."