About 80 IT staff are expected to lose their jobs over the next year under the restructuring, according to union officials.
The realignment shows the risks to IT staff in company mergers when the dominant company sweeps away duplicated IT systems.
Under the restructuring NatWest's back-office insurance services will be taken over by the Green Flag group, which is part of the Royal Bank of Scotland Group.
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The shake-up follows the merger last year between NatWest and Royal Bank of Scotland.
The bank did not say how many IT job losses are expected in the 90-strong insurance department but unions claim that about 80 jobs will go.
"We are hoping that this will be managed by voluntary redundancy and that there will not be any compulsory redundancies," said Robin Haggitt, general secretary of banking union Unifi.
"It's not quite as bad as it sounds," he added.
The job losses will be phased in over the next year although Royal Bank of Scotland said it would seek to re-deploy affected IT staff in other parts of the group.
The bank is in the process of centralising IT systems and hopes to have a unified IT infrastructure across the group by the end of 2003.
IT jobs in the financial services sector can also be jeopardised when long-term outsourcing agreements are scrapped because they are not flexible enough to accommodate company mergers and restructuring.