Non-Lloyd's companies tipped as takeover favourites

A bidding war could erupt over Lloyd's insurer Chaucer, with interest coming from outside the London market, senior market sources have predicted.

Last week Amlin confirmed it was in discussions to make a bid for Chaucer, leading to speculation that other insurance groups would make bids.

Senior sources said bids from non-Lloyd's companies were more likely.

"There is certainly the possibility of a bidding war. But future bids are unlikely to come from within the Lloyd's market," said the source.

The source claimed Chaucer would not risk losing its senior underwriting staff to its London market competitors by agreeing to the Amlin bid instantly.

"A takeover from within the London market is extremely difficult," the source explained. "Senior underwriters might get up and leave if they are uncomfortable with the takeover company."

The source said a bid from outside the London market would sit more comfortably with Chaucer underwriters: "There has been talk that Chaucer could become the specialised Lloyd's branch of a larger company."

Overseas reinsurers are also expected to show an interest in using Chaucer as a gateway to the Lloyd's market.

There was further speculation that Brit, which currently holds an 8.4% share in Chaucer, will add its name to the list of bidding contenders.

But others rejected such suggestions, saying that Brit had reduced its shareholding in the company since the beginning of the year from 10%.