Bermuda reinsurer Validus Re will this week announce that it has bought Lloyd's of London's Talbot Underwriting in a $400 million deal, according to a UK newspaper.

The takeover, revealed by The Sunday Telegraph, will mark the first time that one of the new wave of Bermuda companies, established in the wake of Hurricane Katrina, has bought out a Lloyd's syndicate.

And it is indicative of the muscle that the Bermuda can now flex in the global insurance and reinsurance market.

Validus filed in January with the Securities and Exchange Commission to float on the new York Stock Exchange. It hopes to raise $200 million for the initial public offering.

Validus was originally backed by Aquiline Capital Partners, a private-equity firm run by Jeffrey Greenberg, the deposed chief executive of insurance broker Marsh and McLennan. Talbot was put up for sale in January. The syndicate underwrites a wide range of marine and energy businesses, as well as war, terrorism, political risk, property, financial institutions, contingency and treaty business.

Last year, Bermuda-based Catlin bought its smaller rival Wellington Underwriting for $591 million. That deal was the first significant transaction in the Lloyd's insurance sector for several years.

Many industry observers expect more consolidation to come, with Bermuda's reinsurers, awash with cash after a year of low claims, well positioned to look for expansion opportunities.

The Telegraph claimed that other Bermuda companies, Ironshore and Montpelier Re, were weighing up possible takeovers of Lloyd's syndicates.

The weekly also reported that the Validus deal valued Talbot at about double its book value. Talbot's three private equity owners — including Black Diamond Group, a fund run by Heidi Hutter, the former director of Equitas — are in line for a windfall. The other backers are US-based Olympus and Reservoir Capital Group.

Validus will follow CastlePoint and Flagstone as the third of the Island's post-Katrina start-ups to offer shares to the public.