Property and casualty insurer ACE Ltd < said it would buy smaller rival Chubb Corp for $28.3 billion to diversify its portfolio and reduce exposure to rock-bottom catastrophe insurance rates.

Over the past two years, rates in the once-lucrative catastrophe insurance market have fallen due to fierce competition between underwriters and fewer big disasters.

The deal is at a premium of 30 per cent to Tuesday’s closing price for Chubb stock, based on the offer price of about $124.13 per share. Chubb shares rose 33.5 per cent in premarket trading yesterday, while ACE shares were up about 8 per cent.

Chubb shareholders will receive $62.93 in cash and 0.6019 ACE shares for each share held, ACE said.

The combined company had total shareholders’ equity of nearly $46 billion and cash, investments and other assets of $150 billion, as of December 31.


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