US insurance and reinsurance giant XL Group has announced a cash and share acquisition of major Lloyd’s operator Catlin Group.

The deal, announced on Friday night, is worth £2.79 billion ($5.15 billion) and will see the two companies merge to trade as XL Catlin.

Catlin founder and CEO Stephen Catlin describes the merger as an opportunity to build “a market-leading global specialty and property catastrophe insurer which will be far better positioned to respond to the changing dynamics impacting the broader insurance and reinsurance markets”.

The combined entity is expected to be world’s eighth-largest global reinsurer, with a combined workforce of about 7000.

XL and Catlin already share many characteristics. XL was founded in the 1980s by a group of US investors. It is domiciled in Ireland and listed on the New York Stock Exchange and the Bermuda Stock Exchange. It provides property, casualty and specialty products to industrial, commercial and professional firms, insurance companies and other enterprises on a worldwide basis.

Catlin is based in Bermuda and listed on the London Stock Exchange. It is an international specialist property/casualty insurer and reinsurer that underwrites worldwide through six underwriting hubs.

Both companies have significant operations in Australia.

XL CEO Mike McGavick says Mr Catlin will work within the combined company and also serve on the board.

“We will benefit enormously from Stephen’s input in all strategic decisions and through our ability to leverage his vast market network as we implement the strategy of the new combined company,” he said. “With the combination of our talented teams, we expect to maintain strong financial fundamentals while generating attractive economics and long-term value for shareholders.”

Mr Catlin says the enlarged business will benefit from “increased diversification, significant further economies of scale, strengthened franchises in each of its markets and an improved standing with intermediaries”.

XL Australia CEO Craig Langham was unable to discuss the local implications of the deal when contacted today by insuranceNEWS.com.au, with all media enquiries being handled out of XL’s New York office. Catlin Australia Country Head Andrew Case could not be contacted before this bulletin was published.

It’s expected the local implications of the merger will not become clear for some months. However, media reports from the UK have suggested the deal will see redundancies take place in the London market, with XL pledging to cut at least $US200 million ($243 million) from costs.