There are reports that AMI Insurance is to be sold, with Australian insurance and banking company , Suncorp, considered to be the frontrunner.
AMI received a $500 million financial backstop package from the Government in April after the insurer admitted it might not have enough in reserves to pay claims from the Christchurch earthquakes.
In September, AMI said it expected to sort out its capital raising plans, which included the option of a sale, in the next couple of months.
Tower has expressed an interest in buying AMI, but Suncorp is thought to have the inside running, while Swiss-based insurer Zurich has also been touted as a possible buyer.
Suncorp owns the Vero and AA Insurance brands.
Tower would not comment, AMI did not return calls and Suncorp says it does not comment on market speculation.
Fat Prophets research manager Colin Whitehead of Sydney says Suncorp is already well-positioned in New Zealand, but it may consider acquiring an extra 450,000+ AMI customers at a cheap price worth the cost.
He says there could, however, be competition issues with Suncorp, given its established interests here.