A leading analyst has said that Royal & SunAlliance (RSA) and CGU are ripe for takeover unless their market valuations recover.

The comment comes hot on the heels of the current debate about poor service standards to brokers arising from recent industry consolidation.

In a market report, Goldman Sachs says that fears of exposure to catastrophe losses and potential Y2K claims have been "overdone" and that both RSA and CGU stocks are very attractive.

The insurers have underperformed the market over the last month by 20% and 11%, respectively, and valuations are at their lowest for some time. RSA is currently trading at around book value and CGU at around 1.3 times book value

"We believe that if valuations fail to recover from their current lows, both stocks could become the subject of further European consolidation," the report said.