Cash-rich Zurich Insurance is weighing a bid for British rival RSA Insurance Group which could top $8 billion and be the latest industry tie-up amid toughening regulations.

The impending launch of new European rules governing how much money insurers must set aside to protect against potential market shocks, has already prompted some deals to diversify revenue streams, and with low investment returns and soft insurance prices in many markets, analysts expect more.

Following recent speculation, Switzerland-based Zurich, a 45 billion Swiss franc ($47 billion) firm offering a range of life and general insurance products, said it was looking at a bid.

“Zurich notes the recent market speculation in relation to RSA Insurance Group PLC and confirms that the company is evaluating a potential offer,” it said on Tuesday.

“This announcement does not amount to a firm intention to make an offer and there can be no assurance that any offer will be made.”

The Financial Times said Zurich was considering a bid valuing RSA at 5.5 billion pounds ($8.6 billion), or 550 pence a share. Barclays analysts said Zurich had around $3 billion in surplus cash and could take on debt of up to $5 billion.

RSA, with a market capitalization of 4.4 billion pounds ($6.9 billion), declined to comment.

Shares in RSA were up 12.4 percent at 490 pence at 0708 GMT. Zurich shares were down 2.4 percent.

Deal Value

After multiple profit warnings, triggered in part by an accounting scandal in Ireland, RSA hired ex-RBS boss Stephen Hester to lead a turnaround effort.

In its most recent results, it posted a 1 percent rise in net written premiums and said profits were ahead of plan, boosted by disposals.

Shore Capital analyst Eamonn Flanagan said Zurich had looked at RSA in the past and had money to spend, while the idea of an outright sale of RSA was preferable to speculation it could be broken up.

“We haven’t been keen on the break-up story on RSA due to the pension scheme deficit … but a bid for the whole group is a story with legs,” he said, noting pension scheme trustees might want a big injection of cash if RSA was split up.

Barclays analysts said RSA had a pension deficit of around 500 million pounds. Zurich itself has a UK scheme deficit of around $2 billion, “so Zurich has significant experience of managing UK pension issues,” they said.

A tie-up between Zurich and RSA would follow the $28 billion deal between Swiss insurance giant ACE and upmarket property insurer Chubb Corp.

“RSA has strong market positions in Scandinavia, in Canada, a large UK commercial franchise and operations in Latin America,” said RBC Capital Markets analyst Kamran Hossain.

Of particular interest to bidders would be the Scandinavian business in our view. Scandinavian insurance markets have oligopolistic characteristics, with few market players and strong profitability with low levels of competitions.”