Zurich Financial Services in talks with Capita to renew a £300 million outsourcing deal.

Under the current ten-year arrangement, Capita manages administrative processes and related IT services for Zurich’s life insurance and pensions operations in the UK.

The deal, which began in 2006, was aimed at improving service quality and cutting costs for running the accounts of Zurich’s three million UK life and pensions customers. It also covers the adminustration of Zurich’s contact centres in Cheltenham and Swindon.

When the contract was signed, Capita said the focus was to “simplify business processes and accelerate technological performance to achieve further improvement”. The deal was reportedly the largest outsourcing arrangement for life and pensions administration services in the UK, with over 1,000 Zurich employees transferring to Capita.

Capita told investors in a statement last week that it was in “detailed discussions” with Zurich “regarding a potential extension of the term” of the deal after its expiration in 2016.

It is also discussing a possible expansion to cover some of Zurich’s administration hubs in Europe and the Middle East. It did not say when a deal would be signed, although it is understood that details could be finalised during the summer.

Over the coming months, a “comprehensive assessment of the proposal and scope of operations” in a potential arrangement will be discussed, Capita said. However, it said there was “no assurance” that a final agreement would be signed.

A year ago, Zurich signed a deal with CSC for the management of the insurer's data centres and IT services. The deal is worth up to £1.75 billion over 10 years.