LONDON (Bloomberg) — Bermuda-based reinsurer Ariel Holdings Limited has agreed to buy Atrium Underwriting Plc for $193.2 million ($396 million) to tap the Lloyd's of London insurance market, the world's biggest.Shares of Atrium surged after it received the cash offer of 365 pence a share, 18 percent more than the closing price on July 19. More than 30 percent of shareholders have agreed to the take-over, backed by Atrium's board, Bermuda-based Ariel said in a statement on Friday.

"The Bermudians are under huge pressure from the rating agencies to diversify, increase their capital base or reduce their underwriting," said Eamonn Flanagan, an analyst at Shore Capital in Liverpool who has a "hold" rating on Atrium stock. Other Lloyd's insurers including Chaucer Holdings Plc, Hardy Underwriting Plc and Kiln Plc may be attractive targets for Bermuda-based companies, he added.

The acquisition, which will expand Ariel's territory, comes as Bermuda companies look to diversify beyond traditional catastrophe reinsurance. Lloyd's insurers including Hiscox Ltd. and Kiln Ltd. plan to reduce the amount of business they insure next year amid falling rates across most insurance lines, including catastrophe coverage.

Shares of Atrium jumped 16 percent to 360 pence in early trading in London on Friday, valuing the company at $188 million. That was the biggest gain since October 2002.

The 319-year-old London market is trying to make its operations more efficient and stem the exodus of Lloyd's insurers to Bermuda, where regulation and taxes are lower.

Atrium's profit almost quadrupled last year to $32.2 million after natural-disaster claims fell, it said in March.

"Much of what they do does not replicate what we do in Bermuda," Ariel chief executive officer Don Kramer said in a conference call today. The Lloyd's market "brings credibility and financial stability," he said.

The take-over is scheduled to close this year, and Atrium shares will be removed from trading in London. Closely held Ariel's backers include buyout investors Blackstone Group LP and TPG Inc., Kramer said.

Hawkpoint and HSBC Holdings Plc backed Ariel's bid. Noble & Co. and Lexicon Partners advised Atrium.

Last Friday AM Best placed its "bbb+" issuer credit rating on Atrium Underwriting under review with "negative implications."

The agency said: "The rating will remain under review while AM Best assesses the impact of the transaction on Atrium's risk-adjusted capitalisation and its strategy at Lloyd's of London.