Primary Broker Services (PBS) and ATD are to merge in first stage of PBS's rebranding exercise.
Under the plans announced this week, the combined underwriting agency will write an annual £100m gross written premiums. PBS Holdings subsidiary, Rural Insurance Group, will not be included in the merger. Jonathan Davey, chief executive of PBS Holdings, said the merger was a "natural step."
He said: "Given the product ranges, markets and locations of the two companies, we felt that the synergies were extremely strong and should be leveraged within a structure that facilitates growth and takes advantage of opportunities."
A spokesman said: "There will be a new name for the new entity, and it will be decided upon after we have consulted staff and group companies."
There are also plans to create a new company structure which will be announced once the merger has been given regulatory approval.
