ABOUT 20 former employees of Benfield have been contacted by the firm and warned not to poach clients, after their defection forced the reinsurance intermediary yesterday to issue a profits warning that sent its shares down almost 8 per cent.

Elliot Richardson, the head of Benfield’s global facultative division, and up to 20 staff from the 100-strong department were poached by Aon, the insurance broker.

Benfield admitted that “on current estimates” their defection would cause a £10 million fall in 2006 pre-tax profits. Shares in Benfield fell 7.9 per cent to close at 347p each.

Fox-Pitt Kelton, the stockbroker, immediately reduced its pre-tax profit forecasts by £11.8 million for 2007. The company had been expected to post a pre-tax profit this year of £78.3 million.

Benfield said yesterday that it was no longer confident that the global facultative revenues would match expectations. The company said that it had commenced “a legal process in order to protect its business interests”.

The £10 million shortfall will include legal costs and money spent on improving pay for existing staff to ensure that they remain with the company, the intermediary said.

Global facultative is a bespoke cover for large or unusual risks. Although the team account for just 6 per cent of the group’s revenues, worth about £22 million, the fourth quarter is an important renewal period for that type of reinsurance and Benfield’s capacity to handle the business will be hit.

Analysts, however, remained upbeat about Benfield’s prospects.

Neil Manser, an insurance analyst at FPK, said that although the departures were disappointing, it was important not to overestimate the scale of the damage.

“We continue to see the group as the premier reinsurance broker,” he said.

He said that the company’s core reinsurance business was likely to benefit from the stable cost of American property catastrophe cover.

Analysts at Numis Securities, the stockbroker, said: “Benfield has a strong franchise, which we believe should be able to withstand the departure of a few individuals.”

Analysts at Keefe, Bruyette & Woods said in a research note: “We sense that what was initially expected to be a friendly departure by a small number of senior facultative managers has turned into a more widespread attempt by a competitor to poach the whole team. With matters now more acrimonious, we expect that a proportion of the £10 million relates to legal fees and higher costs for retaining the 80-or-so staff who have not yet walked with the key 20.”

In spite of the warning, Benfield said that market conditions still favoured its core property and casualty reinsurance business.

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