Bermuda-based Lloyd's underwriter Kiln could be set to return up to $120 million (£60 million) of surplus capital, it said in a statement yesterday.

Kiln, which has a significant presence in the Bermuda reinsurance market, also plans to sell its 20 percent interest in WRB Europe to WR Berkley for £24.6 million.

The company announced on July 6 that its managed Lloyd's underwriting capacity for the 2008 year of account would be reduced to £847 million.

Kiln said that assuming its sale of the WRB europe stake goes through, it expects to have surplus capital of approximately £60 million by the year end, equivalent to some 21 percent of the group's market capitalisation as at November 5 of £280 million.

The board intends, in the absence of unforeseen circumstances, to return this surplus capital to its shareholders in order to enhance shareholder returns, the statement said.

"It is currently envisaged that, subject to shareholder approval, this would be achieved through a share buyback by way of tender offer of £45 million and ongoing market purchases under Kiln's existing share buyback authority."

In 2003, Kiln invested £16 million to acquire a 20 percent interest in WRB Europe, an FSA-authorised insurance company which was formed by W.R Berkley Corporation to write casualty insurance business. WR Berkley is a 20.1 percent shareholder in Kiln, having first acquired a shareholding in the Group in 2002.

Kiln Ltd. chief executive Edward Creasy said: "Kiln is firmly committed to a strategy of active capital management in order to enhance shareholder returns. We are delighted to be in a position to return a substantial sum to shareholders, including the proceeds of our successful investment in WRB Europe, while retaining sufficient capital to pursue our strategic plans."