Shareholders and policyholders in Aviva, which manages policies under the CGNU and Commercial Union brands, look set to share in payouts of up to £3.3 billion (€4.9 billion) as the UK's largest life assurer takes its first formal step towards unlocking "orphan" assets held in two of its with-profits funds.

Last week Aviva confirmed that it was looking to appoint an independent advocate to represent the interests of 1.4 million policyholders in the firm's CGNU Life and Commercial Union Life Assurance funds. The appointment of an advocate, who must be approved by the Financial Services Authority, is designed to reassure policyholders that they will get their fair share of any distributions from orphan assets.

Orphan assets, or inherited estates, are surplus assets within a with-profits fund that have been accumulated in previous years. Frequently, these are assets that belonged to policyholders who are no longer alive.

Past reattributions of these assets have led to bitter wrangles between shareholders and policyholders over who is entitled to benefit. This was the case with Axa, the French insurer, which was accused by some consumer groups of being unfair to its policyholders when it unlocked its £1.7 billion orphan estate in 2000.

Norwich Union, the brand which Aviva trades under in the UK, says it has not made a firm decision on the reattribution of its orphan assets. In the Republic the group trades as Hibernian and any possible payout would affect only those who had with-profits policies with CGU, the trading entity of Commercial Union and General Accident before it was taken over by Aviva. About 4,450 of Hibernian's 400,000 customers would likely be affected, according to a spokeswoman who insisted that it was premature to even talk about a payout. Despite concerns over fairness in the Axa case, Aviva insists its policyholders will have a greater say in events.

"One of the problems for Axa was there was no proper policyholder advocate involved in those discussions," said Mike Urmston, finance director with Norwich Union Life. "Since then the FSA has published a process for reattribution of orphan estates and this process has in our view put in place a better structure [for policyholders]."

The advocate will typically negotiate with the firm on behalf of the with-profits policyholders. This could see him pushing for greater payouts to policyholders.

The policyholder advocate will also advise policyholders on issues such as the allocation of benefits and the criteria used for determining eligibility.

Norwich Union does not have a timetable for appointing an advocate, but says any decision on carving up assets would be at least two years away.

"Clearly we've got to design a scheme which will be fair to all our customers," says Mr Urmston. But consumer groups are unconvinced that the FSA's new rules will put Aviva's policyholders in a better position than Axa's.

"We have always asked the FSA to force assurers to attribute orphan assets on the basis of 90 per cent to the policyholders and 10 per cent to shareholders," said Mick McAteer, principal policy adviser with Which?, the consumer advocacy organisation.