Refuge, the life and pensions group, emerged as the most likely candidate with Britannic also in the frame.
The rumours of an insurance hit have circulated for months with the giants of the industry, such as Legal & General and Royal Insurance, attracting much of the attention.
Talk of raids from the Continent has often mesmerised the market. And National Westminster Bank's recently inherited cash pile has added to the speculation. NatWest is seen in many quarters as a possible bidder for L&G, lured by the pounds 36bn the insurance group has under management.
The hovering presence of predatory outsiders could also inspire mergers among the insurers or defensive deals with other financial groups.
Refuge is one of the smaller quoted groups, valued at around pounds 750m. Its largest shareholder is Britannic with 10.2 per cent. It is known to be in talks with the Department of Trade and Industry over its so-called "orphan" funds. A successful outcome of these talks could have a powerful influence on shareholder funds, and probably prompt sharp dividend increases.
In modest trading Refuge shares rose 19p to 474p; Britannic, valued at pounds 1.5bn, gained 16p to 799p. ABN Amro Hoare Govett believes the shares are worth pounds 10.
The excitement spread to other insurers with L&G up 6p to 678p; General Accident rose 17p to 659p; Prudential Corporation added 10p to 434p (a two day gain of 19p) and Royal 10p to 392p.
The market surged in early trading, inspired by New York's overnight performance. Then shares milled around waiting in hopeful anticipation of another upbeat Wall Street display. As soon as evidence of continuing US bullishness was forthcoming there was little doubt shares would end the session at a record high.
In the event the FT-SE 100 index closed 27.7 points higher at 3,715.6 after touching 3,719.8. Although the holiday continued to reduce attendance trading was brisk with institutions prepared to take on some chunky lines of stock.
Heavy trading in National Grid, with Seaq putting volume at 45 million, suggested another regional electricity company had sold at least part of its shareholding. The price rose 1.5p to 201p.
Lloyds TSB was another heavily traded, with more former TSB shareholders switching to Barclays, up 20p at 778p. Lloyds rose 6p to 325p. HSBC gained 20p to 1,027.5p. It has been chosen as the underlying stock for a new quoted instrument, Hypers. Societe Generale Strauss Turnbull is behind this latest brainwave, an intriguing play on the dividend. The SGST scheme offers a 7.4 per cent yield compared with HSBC's historic 3.4 per cent.
Vodafone, off 5p at 221p, was busily traded following disappointment with its Christmas sales. In contrast, Northern Foods, said to be pleased with Christmas trading, gained 3p to 179p. Talk persists it is near to selling Fox's Biscuits.
Savoy Hotel was caught in the backlash of the Forte-Granada confrontation. Forte's decision to hand its Savoy stake to its shareholders was seen as reducing the chance of a bidder appearing, sending the shares tumbling 108p to 940p. Ladbroke remained firm, up 2p at 158p.
Insurance brokers Sedgwick and Willis Corroon edged forward on continuing speculation of a strike. Lloyd Thompson was back in the frame, up 13p to 183p, a two day gain of 16p.
Elsewhere Lloyds Chemists attracted renewed speculative attention, gaining 10p to 270p. ICI jumped 32p to 797p as James Capel, sellers for the past three years , moved its recommendation to hold.
United Utilities, the North West Water/Norweb combination, continued to sink, off another 15p at 594p. Bridon, down 14.5p at 104.5p, was the day's profit warning casualty; Amstrad continued to reflect the departure of its chief executive, off 7.5p to 189.5p.
Builders were firm on continuing hopes that the housing market could start to improve. Barratt Developments rose 11p to 258p.
Zergo, the anti computer hacking group, gained another 50p to 300p and Clarke Nickolls & Coombs, the property group, firmed to 8p. Following Tuesday's arrival of Richard Upton and Andrew Nedham with almost 30 per cent, CNC has acquired a property in Twickenham, South-west London, for cash and shares, giving Glaxo Trustees a 3.2 per cent stake.