Direct Line, a subsidiary of Royal Bank of Scotland Group, has bought Royal & SunAlliance's Italian direct motor insurance operation, Royal Insurance, for £12m.
The payment will be made in cash and is subject to post completion adjustment.
Royal Bank group chief executive Fred Goodwin said: "This acquisition, making us the second largest direct insurer in Italy, gives us an even stronger platform for further growth.
Direct Line first entered the Italian market in September last year with the purchase of Allstate's motor insurance operation.
It launched its distinctive red telephone brand in Italy last week.
R&SA said it would still have a presence in the Italian market through its Genoa-based intermediated general insurance business, Royal & SunAlliance Assicurazioni.
It will also retain the Milan-based office of its company Royal International Insurance Holdings, which underwrites global general insurance.
R&SA Eurolife, R&SA's cross border unit-linked life business will also continue to be operate out of Milan.
