Reinsurance firm Arch is considering a $6.56 billion bid for rival firm Axis Capital, according to a UK newspaper report.

Axis is locked in a two-way tussle with Italian investment firm Exor for control of another Bermuda-based reinsurer PartnerRe.

Shareholders in Axis and PartnerRe — near-neighbours on Pitts Bay Road in Pembroke — will meet next month to vote on the proposed merger, which would create an $11 billion giant.

The merger is up against a $6.8 billion bid by Italian investment firm Exor, controlled by the Agnelli family, which has said it would retain PartnerRe as a stand-alone company.

It is understood that Arch has made a series of “friendly approaches” to Axis over a period of years.

According to London’s Financial Times, Arch has had informal talks with at least one investment bank and is prepared to offer at least $65 a share for the firm — although the report stressed that “no formal offer is assured”.

Axis’ recent investor presentation valued its common equity at $5.3 billion, with a total capitalisation of $7 billion.

The Axis share price was $56.45 at the close of trading in New York yesterday.

The combined Axis and PartnerRe, which would have around 130 employees on the Island between them, said it expected to make savings of $200 million, partly through redundancies.

The joint firm — billed a merger of equals — would also likely require less office space.

An Arch takeover of Axis, which both have reinsurance and insurance divisions, would also result in duplication of resources and an opportunity to cut costs.