Brit warns on premium hikes

AN EXPLOSION in compensation claims against stockbrokers for poor advice will help trigger huge rises in the cost of professional indemnity cover over the coming year, Brit Insurance has warned.

Chairman Jo Welman said there would be 'mushrooming claims' against investment banks in respect of alleged mis-selling of technology stocks during the dotcom boom.

This would combine with the Enron fallout to drive up professional indemnity premiums, including those for company directors and executives, by about 40% this year, Welman said. He also warned that the insurance industry, hit hard by a string of disasters last year, faced more corporate casualties over the next 12 months.

Brit lost £90.5m as a result of the 11 September attacks on the US. This combined with losses on its investments to leave the group with a £114.5m pre-tax loss for 2001, compared with a £1.5m profit previously.

Brit, which raised £154m in December to take advantage of rising premiums, has abandoned its dividend (3.1p previously). Welman said Brit had little exposure to professional indemnity cover in 2001 but planned to expand its interests in this area.