Ariel Re is set to face stiff competition from other companies in its bid to secure Lloyd's insurer, Talbot Underwriting.
The Bermuda reinsurer, led by industry veteran Don Kramer, has emerged as favourite to buy the company, according to senior industry sources.
But, it is understood that interest has been expressed from a number of other parties, with a UK-based company also thought to be making strong advances.
"There are lots of potential runners and riders," a market source told Insurance Times.
"Bermuda-based bidders would see it as a way into Lloyd's.
"Americans can see an attractive tax structure if they are not too big and go for a reverse take-over.
"Over-taxed British businesses would also see the tax benefits apart from a decent business."
Fierce competition is likely to keep the sale price high, despite suggestions the company had been overvalued.
According to reports, Talbot has been put up for sale for an estimated £200m by its private-equity owners, Black Diamond Group, run by former Equitas director Heidi Hutter, Olympus and Reservoir Capital Group.
Both Talbot and Ariel declined to comment.