Up to 900 jobs could be lost as part of 10 per cent cost cutting exercise.
Zurich could cut as many as 900 UK jobs in a bid to shave 10 per cent off its costs base by the end of the year.
In a statement the insurer said it was taking action to ensure it had a platform in place that would deliver sustainable profitable growth while increasing the organisation's efficiency and effectiveness.
Zurich, which is considered the front-runner in the race to buy RBSI's multi-billion pound insurance assets, said the move was driven by the tough market conditions combined with intense competition among insurers.
In February, the company posted flood-hit 2007 UK profits of £91m. Its combined operating ratio stood at 104.8% - significantly higher than rivals AXA, Allianz and RSA.
Zurich said the decision would allow the company to position itself to take advantage of more favourable market conditions in the future.
“We can achieve our growth plans and safeguard the future of our business in the UK. Unfortunately, this means tough decisions have to be made and we will be reducing our headcount.
Guy Munnoch, UK chief executive
The statement said: "All aspects of the business will be considered, from processes and technology, through to people and locations across the UK, in order to ensure Zurich's UK general insurance business enhances both its level of customer focus and its operational capabilities."
A spokeswoman said it was expected that between 700 and 900 jobs could be cut. The company laid off around 40 staff in October last year.
Guy Munnoch, chief executive of the insurer's UK business, said: "Our strategy remains clear. We aspire to being the leading multi segment, multi distribution general insurer in the UK.
"We recognise that there are difficult times ahead for our people; however it is clear that if we want to remain competitive, we must act swiftly to increase efficiencies, so that we can achieve our growth plans and safeguard the future of our business in the UK. Unfortunately, this means tough decisions have to be made and we will be reducing our headcount. We remain, as always, committed to engaging with our people throughout this process."
Zurich said it expected to achieve the 10 per cent reduction in its cost base by the end of 2008 and had entered a 90-day period of consultation with the Union of Finance Staff and employee representative bodies.