Investors watching share dealings in Royal & SunAlliance (R&SA) on Tuesday would have been forgiven for thinking the insurer was about to be taken over.

As Insurance Times went to press, it had posted the biggest gain for a FTSE 100 company, rising to as high as 149.75p, in an otherwise lacklustre stockmarket.

However, dealers suggested that R&SA had suffered a sharp sell-off like other insurance companies, and, although takeover speculation could not be dismissed completely, it was more likely to be just recouping some of its losses.

Traders pointed out that on Monday the insurance sector had tumbled 1.86%, as stock markets around the globe tumbled on worries about the US economy and a sliding US dollar.

Financials are usually the first to be hit in a weak market as investors switch into shares with 'defensive' qualities - namely supermarkets, utilities and tobacco stocks.

Another stock to attract attention was Aviva. The insurer unveiled plans to return surplus assets to policyholders and shareholders. Analysts reckon the estimated fund - known as orphan assets - could be worth £4bn and this could add a further 25p to 50p to Aviva's share price. Aviva is now at 781p.

Aquilo traded lower at 0.9p. The Aim-listed insurer, which has recently been in failed takeover talks, said it was in discussions to sell its motor services business.IT

Yvette Essen is stock market reporter for the Daily Telegraph