Limit and Wellington will merge several of their syndicates as part of their bid to produce pre-tax operating cost savings of at least £26m from their merger.
Limit's two commercial syndicates, 877 and 980, will be merged together, and its syndicates 79, 456, and 566 are expected to be merged with Wellington's syndicate 2020.
The new group, which will be named Ensign Underwriting, creates the leading independent Lloyd's-based insurance business with combined gross written premium income of £1.3 billion. It will have a market capitalisation of about £310m.
Ensign's board of directors will be drawn from both Limit and Wellington. Jonathan Agnew becomes executive chairman and Ian Agnew (no relation) becomes deputy chairman.
Julian Avery is the group managing director, Steven Burns is the agency managing director and Julian Cusak is the finance director.
Limit chairman, Jonathan Agnew said: "A merger with a business of the high quality of Wellington's represents a unique opportunity for Limit to create the leading underwriting business at Lloyd's. We should be in the strongest possible position to take advantage of the expected upturn in the insurance underwriting cycle.
"The business and financial benefits of the merger should generate substantial value for shareholders."
The merger will be effected by a recommended offer to Wellington shareholders of 91 new Ensign shares for every 100 Wellington shares
The merger values Limit's and Wellington's businesses in the ratio of 71 to 29. Limit's board has also recommended acceptance to their shareholders.