LONDON (Reuters) ? Lloyd's of London insurer Wellington Underwriting Plc said today that it is in takeover talks with Bermuda-based rival Catlin Group Ltd.

Shares in Wellington were up nearly 15 percent at 111 pence at 1423 GMT while Catlin shares were up 2.6 percent at 499-3/4 pence, valuing them at around 544 million pounds ($1.02 billion) and 817 million pounds respectively, according to Reuters data.

"The board confirms that it is in discussions with Catlin Group Limited which may or may not lead to a cash and shares offer being made for the company," Wellington said in a statement.

The company said that discussions were continuing and the board would update shareholders in due course, but said the business plan for the enlarged group would have to be likely to deliver greater value to shareholders than Wellington's standalone plans.

Shares in other Lloyd's businesses were also pushed up on hopes a deal could spark a wave of M&A in the insurance market, with Chaucer Holdings and Hiscox both up over four percent, while Kiln shares surged over six percent.

"The potential for cost savings is fairly significant," said Seymour Pierce analyst Gerald Farr.

"There is likely to be a big overlap in terms of the two top lines but I don't think that either of them is a big enough player for a merger of the two to mean an automatic loss of business," Farr said.