Pressure is mounting on the government to explain the relationship between the NHS Litigation Authority (NHSLA), which pays compensation to victims of clinical negligence, and after-the-event (ATE) insurer FirstAssist.

In a letter to health secretary Alan Johnson and justice secretary Jack Straw – seen by the Gazette – John Baron, Conservative MP for Billericay and District, said that an ‘accord’ between the two appeared to be ‘highly advantageous’ to FirstAssist and of ‘considerable public interest.’

But Peter Smith, managing director of FirstAssist, said: ‘[The letter] is based on a misapprehension that the NHS has made some sort of deal, and arguably shows ignorance of the background. It [the accord] is a gentleman’s agreement and is not binding.’

He also said FirstAssist had not been contacted by Baron or asked to publish the accord – which the MP acquired using Freedom of Information laws – and that FirstAssist would have had no problem publishing it if asked.

In his letter, Baron asked the government to explain why FirstAssist apparently had powers to determine both insurance rates and disputes over proportionality of premiums. He also pointed to a Supreme Court Costs Office case in 2005, where FirstAssist’s premium calculation methods were described as ‘inherently and seriously fundamentally flawed’ and suggested alternatives should be used in future.

The NHSLA accord, which came into effect on 1 December 2005, states calculation methods used would adhere to the 2005 ruling. The NHSLA paid £547m for medical negligence claims in 2007/08, plus £114m on claims not directly linked to doctor error.

The NHSLA declined to comment.