Bermudian-based OneBeacon Insurance Group is to be bought by Canadian insurer Intact Financial Corporation in a $1.7 billion deal.

The transaction will create a North American lender in speciality insurance with more than $1.5 billion of annual premiums.

The two companies have entered into a definitive merger agreement, with Intact to acquire all outstanding OneBeacon shares for $18.10.

Before the announcement, OneBeacon’s stock yesterday closed on the New York Stock Exchange at $15.70.

In January, Bloomberg News reported that OneBeacon was thought to be exploring a sale.

The speciality insurer is controlled by White Mountains Insurance Group Ltd, which owns 75.7 per cent of its total shares.

In a statement released through the Bermuda Stock Exchange, White Mountains said it had entered into an agreement to vote in favour of Intact’s acquisition.

The company said it expects to receive $1.3 billion from the transaction, which would increase its adjusted book value to about $107 per share.

OneBeacon, which has its corporate headquarters on Reid Street, said the transaction would “bolster Intact’s Canadian business with new products and cross-border capabilities, and better positions the company to compete with North American insurers”.

Mike Miller, chief executive officer of OneBeacon, said: “We are all very excited to join the Intact family.

“The opportunity to leverage Intact’s deep technical, financial and technology capabilities makes this combination the perfect next step in the OneBeacon journey.

“Together, we will accelerate our pursuit in creating a leading speciality insurer in North America.

“We look forward to working with our US and Canadian independent agents and brokers to deliver market-leading capabilities to our targeted customers. Both companies are dedicated to ensuring a seamless transition and look forward to profitably growing our speciality portfolio going forward.”

While Charles Brindamour, CEO of Intact, said: “Today, we’ve taken an important step in building a world-class P&C insurer. The addition of OneBeacon is creating a leading North American speciality lines insurer focused on small-to-midsize businesses.

“OneBeacon is a strong strategic fit for Intact, with deep expertise in commercial and speciality lines, and shared values. We see significant growth potential from the combination of our speciality lines operations and we look forward to welcoming OneBeacon employees to the Intact family.”

The transaction, which was unanimously approved by OneBeacon’s board of directors, is expected to close in the fourth quarter of 2017. It is subject to regulatory approval and other customary closing conditions.