Insurance firm Ace has agreed to buy out a major US-based insurer in a $28.3 billion deal.

The move means Ace, which has an office in Bermuda, will have a 70 per cent stake in New Jersey-based Chubb after the deal closes.

The new firm will use the Chubb name — ending the Ace brand.

The acquisition will position Ace to to compete with rivals like AIG and Warren Buffet’s Berkshire Hathaway by boosting Ace’s presence in the high net worth market covering mansions and yachts.

And it will add operations selling workers’ compensation and commercial vehicle insurance to Ace’s array of products.

The combined firm is also expected to save around $650 million within its first three years where Ace and Chubb overlap.

Ace chairman and CEO Evan Greenberg, who will take the same role in the combined operation, said: “This transaction advances our strategy in a meaningful way and represents an outstanding opportunity to create significant value over a reasonable period of time for both Ace and Chubb shareholders

”We are combining two great underwriting companies that are highly complementary. We will make each other better and create a unique company in a class of its own that has greater growth and earning power than the sum of the two companies separately.”

He added: “We will be well-balanced with greater presence and capabilities in product areas that have less exposure to the commercial property and casualty cycle.

“We have complementary product strengths — where one of us is not present, the other is. Where one of us is strong, the other is even stronger.

“Where there is overlap in product, generally one of us is more present at the large end of the corporate market while the other is serving the smaller or mid-market segment.”

Mr Greenberg said that the ability to share data and insight into the various market segments would also enhance the joint business.

And he said: “Finally, we will benefit from each others complementary cultures, including a shared passion for underwriting discipline and outstanding claims service.

“Operating under the Chubb name, with sustained long-term underwriting profit and a larger invested asset base that will benefit from rising interest rates, we will take advantage of the growth opportunities and significant efficiencies to be gained between us.

“Together, we will grow more substantially and at a faster rate, producing greater earnings than we could achieve as two separate companies.”

Chubb chairman, president and CEO John Finnegan, who was slated to retire next year, will become executive vice-chairman for external affairs in North America and take a major role in work to merge the two operations.

He said: “This is a compelling transaction for all Chubb and Ace stakeholders.”

He added: “We are confident that it will deliver strong value to Chubb shareholders, including an immediate premium and participation in the future growth and profitability of a well-positioned combined company.

“We’re pleased that the combined company will adopt the Chubb brand and view this as an affirmation that both companies share a commitment to the attributes of quality and service the brand represents.

“We look forward to working together as we create a best-in-class global franchise in property and casualty insurance.”

The purchase price is equivalent to more than $124 a share for Chubb investors — a 30 per cent premium on the share price just before the deal was announced.

The deal is expected to close in the first quarter of next year.

The combined firm will be based in Zurich, Switzerland, where Ace is headquartered.

And Mr Greenberg — who has made several acquisitions since he took over the reins at Ace in 2004 — predicted the rash of mergers and takeovers in the market would continue amid increased competition.