Chaucer shareholders have questioned a £2.98m 'break fee' owed to Hanover if the takeover deal falls through.

Investors said the terms of the 'break fee' contained in last week's takeover documents weren't in shareholders' interest, according to The Times.

"Why would we have to pay if we vote down the takeover?" one Chaucer shareholder said.

No investors have complained about the clause, the newspaper said. Shareholders who backed the deal were unaware of the special terms.

Revelations of the deal come shortly after Russian private equity house and major shareholder Pamplona said it would not be backing the bid from Hanover, a US personal lines insurer.

Pamplona is Chaucer’s largest shareholder, with a 9.99% direct equity stake. It also owns derivatives equivalent to a 6.52% holding, bringing its total share of the Lloyd’s insurer to 16.51%.

For the deal to go through, 75% of shareholders must back it. Chaucer has already received commitments to vote in favour of the offer from 21.28% of shareholders.

Hanover has received a letter of intent of a favourable vote from Aberdeen Asset Management in relation to a 0.91% stake. Coupled with the directors’ acceptance, representing 1.4%, the deal has the acceptance of 23.59% of shareholders.

Chaucer declined to comment.