Norwich Union set to follow AXA in pull-out from PBS

Norwich Union is poised to withdraw its capacity from Primary Group company PBS Holdings in September, following AXA’s imminent exit.

Norwich Union is believed to be in crunch talks with Primary and is set to pull its capacity unless a radically different deal is reached.

This follows news that AXA, which provides about two thirds of PBS’s capacity to Norwich Union’s one third, is pulling out from the end of this month. PBS’s troubles reflect an increasing reluctance by major insurers to work with managing general agencies (MGAs).

Igal Mayer, chief executive of Norwich Union, and Philippe Maso, chief executive of AXA UK, have pledged to review their MGA arrangements and publicly criticised the model. Maso said this week: “I don’t believe the model functions well.”

In January, Mayer told Insurance Times: “The best commission our brokers receive should be the one they get directly from us, not the middleman. I wish I could say we had eliminated all the deals where the best commission you could get is not by dealing directly with NU, but sometimes we have historic deals where you can do better. Our vision is simple: you should be able to get the best deal by coming directly to us.”

A market source said: “It’s a shame because Primary is not a bad business, but it is dependent on low loss ratios and high commissions, and they’re just not around at the moment. With everything that’s happening in the economy, and to AIG, capacity is just getting scarcer.”

Last week, it was announced that AXA had been replaced by Fortis as capacity provider on another Primary Group subsidiary, UK Underwriting. Market sources speculated that Fortis could pick up some of AXA’s capacity and suggested QBE as a potential provider.

Philip James, chief executive of Primary Group, said last week: “We would like to thank AXA for all their support over the past three years but both organisations felt that they would be best served by pursuing their own strategies independently.”

A spokesman for Primary Group refused to comment on market speculation, but said: “Every February, we go out to the market and discuss all our contracts and what has happened over the previous year. We chat through the implications and discuss which way we think the market is going. We have ongoing discussions with insurers, as we do every single day.”

Norwich Union and AXA both declined to comment.