Aquiline Capital Partners, a private-equity firm led by the son of former AIG boss Hank Greenberg, has snapped up Lloyd's of London insurer Equity Red Star for £87m.
The deal will see Equity's owner Insurance Australia Group dispose of an asset that has been loss making for several years.
The motor insurer has been hit by personal injury claims and in January narrowly avoided a £1m fine from the Lloyd's market following an investigation into its underwriting procedures.
The agreement also ends a bidding war between Aquiline and City entrepreneur Edi Truell.
Mr Truell, the founder of private-equity house Duke Street, was granted preferred-bidder status for Equity last month, but talks between him and IAG collapsed over price.
Mike Wilkins, IAG's chief executive, said: "We believe the sale option delivers the best available outcome for IAG shareholders.
"It also allows us to concentrate on our strategic priorities of accelerating profitable growth in our home territories of Australia and New Zealand."