GUARDIAN Royal Exchange insurance has clinched the deal to buy RAC Insurance Brokers, the insurance broking arm of the RAC.

The final cost of the deal, first mooted two weeks ago (Fleet News April 26), could exceed £72 million. There will be an initial cash payment of £50 million and GRE will also take on £4.7 million of debt and pay a further £18 million dependent on the number of policies it renews and the net assets of the company on the deal's completion.

GRE will use the RAC brand name for marketing to the RAC's six million members and will, in return, market the RAC's roadside assistance packages to its own customers. The RAC insurance operation will become part of Guardian Direct, GRE's telephone insurance operation but will retain the RAC name.

The deal moves Guardian Direct to the super league of 'direct' insurers which cut out brokers and their commissions giving the company around 500,000 policy holders. The biggest in the business is the Royal Bank of Scotland's Direct Line, with more than two million policy holders.