Shares in Wellington Underwriting surged on Tuesday after the insurer said it had received a takeover approach from Catlin.

The company was forced to put out a statement after it posted the biggest rise for a FTSE 250 company, climbing to 105.5p on extremely heavy volumes. Following the confirmation, the shares shot up to 114p.

At the same time, Hiscox was trading at around 266p after Seymour Pierce published a bullish buy note on the stock on the back of its plans to move offshore to Bermuda.

The stockbroker explained: "We are therefore amending our model to reflect, from 2007 onwards, a 15% effective tax burden for the company. This raises our 2007 earnings per share estimate from 28p to 34p, and our target price for Hiscox from 280p to 290p."

Seymour Pierce added there should be earnings revisions for most of the Lloyd's vehicles due to a much milder than expected hurricane season. It particularly favours Hiscox, Amlin and Catlin.

Moving in the opposite direction was Benfield Group. It touched as low as 335p on Tuesday as investors continued to punish the reinsurance broker for last week's profit warning. The company has been picking up stock at these levels to be cancelled, including buying 1.59m shares last Friday at 337.3p.

Yvette Essen is stockmarket reporter for the Daily Telegraph