Tesco’s personal finance arm has struck a deal with Fortis for the Belgian-Dutch financial services group to sell car and household insurance policies to customers of Britain’s biggest grocer.

Up to 1,500 UK jobs will be created if the partnership, agreed in principle, is ratified. UKI Partnerships, the Royal Bank of Scotland-owned group that is Tesco’s current partner, will lose that role if the deal goes ahead.

The supermarket chain receives about £500 million a year in gross premiums from insurance sales, which it expects to grow. It said that the jobs created would be in addition to its current staff and would help to support an expansion drive.

Tesco is expanding its personal finance arm to exploit the weakness of high street banks. It said yesterday that general insurance was central to those growth plans.

Andrew Higginson, Tesco’s chief executive of retailing services, said that the joint venture would offer a range of new insurance products to customers.

The grocer sells credit cards, insurance, loans and long-term savings accounts through Tesco Personal Finance. Last month, it opened its first branded Tesco bank inside a store, which will sell mortgages, current accounts and insurance.

Fortis and Tesco are expected to agree final terms in the next two months. If successful, the partnership will be underwriting new policies by the second half of next year. Fortis already stands behind insurance policies sold by Marks & Spencer, the retailer, and has recently agreed to sell car insurance for John Lewis, an M&S rival. In the past year it has renewed contracts to sell travel policies for Alliance & Leicester and the Post Office.

Tesco previously ran the personal finance arm in a 50-50 joint venture with RBS. However, last July, the retailer spent £950 million buying the bank out of the partnership and taking full control. A spokesman for Tesco said that since then, the company’s plan had always been to find a different insurance provider to underwrite policies.

• Barclays yesterday struck a 25-year deal with CNP Assurance, of France, to sell life insurance policies in Spain, Portugal and Italy. As part of the agreement, Barclays will sell a 50 per cent stake in its Iberian life and pensions subsidiary to CNP for £120 million, with up to £385 million to follow, subject to performance targets.

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