Lloyd's insurers Novae and Omega Insurance are in talks over a potential merger.
Novae confirmed this morning it is carrying out due diligence on Omega, following reports at the weekend that the two firms could merge to create a £500m business.
"The board of Novae notes the recent press speculation relating to an interest in a transaction with Omega.
"In accordance with the group's publicly stated strategy, Novae routinely reviews possible transactions and confirms that it is currently undertaking due diligence in evaluating the merits of proposing a possible merger with Omega," Novae said in a statement to the London Stock Exchange.
"For the avoidance of doubt, there is no certainty that an offer will be forthcoming," Novae added.
Omega was targeted by rival Lloyd's insurer Canopius earlier this year.
It later said it was reviewing several takeover approaches but did not reveal the bidders.
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