A Bermuda insurance company is thought to be in discussions geared at making an imminent bid for Lloyd's of London-listed insurer Kiln.

With the Island's insurance and reinsurance companies awash with money after two extremely quiet years, in terms of hurricanes and other catastrophes, a number of recent start-ups are being viewed as the unnamed firm now involved in discussions with Kiln.

Amongst the speculation about who the potential bidder might be, $1 billion Ironshore Insurance is a front runner on the strength of its sizeable capital assets and its cash offer to Heritage Underwriting in London last week - which according to reports was rejected.

But other firms in Bermuda and the US could equally be the unnamed bidder.

As Kiln has recently redomiciled to Bermuda it would not provide such an advantageous purchase to another Bermuda company in terms of potential tax synergies and also because it has a relatively large book of catastrophe risk business in the US - reducing the advantages of risk diversification for a fellow Bermuda purchaser.

With large piles of capital accumulated during the quiet years of 2006 and 2007, insurance and reinsurance bosses are looking at ways to grow their companies and spread risk.

This year Lloyd's of London has already provided a useful stalking ground for some Bermuda firms, with Ariel Holdings picking up Atrium Underwriting for $395 million in July, just a month after 2005 start-up Validus acquired Talbot Underwriting.

Bob Clements, who set up ACE in the 1980s, was instrumental in setting up Ironshore, which raised $1 billion of capital through private placement. Mr. Clements has just relinquished the company's chairmanship to make way for Ronald Sandler.

Last week Ironshore said it had approached Lloyd's Hardy Underwriting with a bid.

Kiln's board released a statement yesterday acknowledging movement in its share price, which has moved up 12 percent - the biggest gain in seven years of trading.

"The board confirms that Kiln is in discussions regarding a possible offer for the Group," the directors said.

"The board intends to progress these discussions in order to establish as soon as is practicable whether an offer for the Group may be made on terms which the board could recommend to shareholders.

"Shareholders should note that these discussions are ongoing, and there can be no assurance that any offer will be forthcoming for the Group.

"To the extent that an offer is not forthcoming, the Board will proceed with its previously announced share buyback plans."

Yesterday, the company was valued at $712 million. So far no disclosure has been made on who the potential buyer might be.

According to Charles Coyne, an analyst at KBC Peel Hunt in London who was quoted in a Bloomsberg newswire report: "Bermuda companies and US companies will be at the top of the list (of possible acquirers) as they have more capital than they need."

And he described Kiln as a "ready-made and set-up Bermuda operation."

Further reports from Reuters mentioned the attractiveness of Kiln over other Lloyd's firms in terms of it being a cheaper "buy" as it was trading recently at 1.4 times its book value compared to 1.5 times for the sector.

The shares of rival London insurers seen as possible take-over targets, Chaucer Holdings and Novae Group, also moved up sharply in UK trading yesterday.