American insurer AIG is being hotly tipped as the favourite to acquire niche motor insurer Sabre.

Sabre's future has been under a cloud ever since its parent company CGU merged with Norwich Union (NU) to form Britain's largest insurer.

Sabre writes about £60m in premium income. When NU and CGU joined forces, the niche insurer was billed as writing a mainly non-standard book.

But since then NU has decided that Sabre is mostly a non-comprehensive book of business, causing the insurance giant to question whether Sabre is a good “strategic fit”.

A well placed source said: “AIG is definitely looking at Sabre. It is looking for UK acquisitions and believes Sabre fits.”

NU's intermediary business director Ken Wallace said he was “not aware” of any discussions with AIG about Sabre. AIG refused to comment.