Rumours of a potential bid from IAG for an Indian insurer have strengthened on reports the Australian insurer has outbid US and German rivals for a slice of the country's Housing Development Finance Corporation (HDFC).

Indian media has reported that IAG, Australia's largest general insurer, has outbid Munich Re's Ergo unit and US insurer Travelers for a 26% stake in HDFC for at least $50 million.

The share of HDFC, once owned by Chubb Insurance, is reportedly worth an additional $20 million in annual gross written premiums, but 15% annual growth and 80% non-insurance in the general Indian insurance market makes the investment potentially lucrative over the long-term.

IAG has made no announcements to the market on the deal, but has said the company is interested in investment opportunities in India.

After pulling out of a $375 million investment in Beijing insurer China Pacific Property Insurance, analysts predicted IAG would shift its foreign expansion ambitions to India, where strong growth and recent deregulation has attracted a torrent of international investment.

IAG CEO Michael Hawker has previously stated the company was searching for growth opportunities both home and abroad.