A bidding war has broken out at the heart of the City involving some of the insurance industry's best-known names.
Edi Truell's acquisition vehicle Tungsten is believed to be in the driving seat to buy Equity Red Star, the distressed motor insurer that operates in the Lloyd's of London insurance market.
Mr Truell, who founded the private equity house Duke Street, is understood to have been granted preferred bidder status by Insurance Australia Group (IAG), Equity's owner.
However, Aquiline Capital Partners, a US private equity firm led by the son of former AIG boss Hank Greenberg – Jeffrey Greenberg – is also known to be interested in the business, which has been valued at up to £100m.
Equity Red Star – the only personal lines syndicate operating in the Lloyd's market – has been hit heavily by mounting personal injury claims over the past few years.
In January, the company narrowly avoided a £1m fine by the Lloyd's of London insurance market following an investigation into its underwriting standards. Instead, it was ordered to pay £95,000 towards the costs of the investigation, having admitted two charges of "detrimental conduct". The charges related to losses incurred by the underwriting syndicate.
Neil Utley, the former IAG UK chief executive, John Josiah, a former senior underwriter at Equity Red Star, and Douglas Morgan, its former UK commercial director, remain under investigation by the Lloyd's market. Lloyd's has the power to impose individual fines on the three men, or even prevent them from working in the market if they are eventually found guilty of misconduct.
Mr Utley, a colourful City entrepreneur who owns his own record label, Nusic Sounds, now owns part of Hastings Insurance Group, which is expected to seek a stock market flotation over the coming months.
One sticking point in the bidding process is likely to be Equity's final salary scheme pension deficit, which banking sources say could knock tens of millions off the final price.
According to a report in The Insurance Insider, Aquiline is already thought to have lowered a bid price for the business. The private equity group was thought to be close to agreeing a deal for Equity but retreated after uncovering the pension liabilities.
In contrast, Mr Truell has experience in the pensions industry, having set up Pension Corporation, a buy-out firm, which consolidated UK company pension schemes.
A spokesman for IAG said: "IAG confirms that, further to its previously announced strategic review, it is in preliminary discussions with a number of parties about the potential sale of its UK business. These discussions remain incomplete and no agreement has yet been reached. There is no guarantee a sale will result from the discussions. IAG will update the market as appropriate."
Mr Truell would not comment on the Equity bid process, but said Tungsten, which was set up to consolidate businesses in the financial services sector, "remained interested in several opportunities".
Aquiline could not be reached for comment.