Speculation that a major takeover deal is afoot in the insurance sector gathered pace again this week, with dealers reckoning that Corvus Capital could be lining up its next target.

Dealers recalled that Corvus, the investment vehicle headed by entrepreneur Andrew Regan, was already familiar with the sector, having previously been associated with a deal for Royal & SunAlliance.

Corvus is understood to still be keen on the sector and, according to market chatter, could look to buy an insurer – possibly a Lloyd's syndicate – worth up to £1bn later this year.

Speculation that it can afford such a sizeable deal has mounted as it has seen the value of one of its major investments – a metals broking business, Commoditrade – climb in recent months.

Dealers calculated the investment helped to add to Corvus' already generous war chest.

On the takeover front, there was also talk that Royal Bank of Scotland could sell off its insurance businesses, Churchill and Direct Line, to fund an acquisition of Dutch bank ABN Amro.

However, the bank brushed off the rumours, saying on Monday: "There's no truth in it whatsoever." IT

Yvette Essen is stock market reporter for The Daily Telegraph