Royal London is in talks to buy Royal Liver two years after the Liverpool-based insurer rejected a merger deal.
A Royal London spokesman confirms that discussions are taking place between the two firms but says they are at an early stage.
The news follows talks between LV= and Royal Liver last autumn about a potential merger which broke down.
The talks are thought to have been spurred on by the FSA’s investigations into the mutual sector and concerns over the capital adequacy of smaller mutuals.
Last October, the FSA sent a Dear CEO letter to mutual insurers with with-profits funds about the use of member assets.
Any deal would have to be approved by members.
Royal Liver last year decided to wind down Park Row after being unable to find a buyer and advisers have since suffered delays getting reauthorised. Last March, Money Marketing revealed that Park Row was being investigated by the FSA as part of a review of its systems and controls.
Informed Choice managing director Martin Bamford says: “The mutual sector needs to be stronger and better organised if it is going to face future financial challenges.”