Axis and PartnerRe have boosted the special dividend for PartnerRe’s common shareholders to $17.50 if they back a merger deal.

And the two firms also pledged to match an offer to preferred shareholders by Italian investment firm Exor, who have launched a $6.8 billion rival bid for PartnerRe.

PartnerRe chairman Jean-Paul Montupet said: “We are very pleased to agree to enhanced terms with Axis Capital so that shareholders can realise the value of the combination.

“This amalgamation will immediately enhance our strategic positioning and financial strength and we will have tremendous resources to build upon our proven track record of stability and success.”

Shareholders in both PartnerRe and Axis will meet on Friday, August 7 to vote on the $11 billion merger.

Mr Montupet said: “We are confident that they will recognise the unique potential of this transformative combination.

“In addition to the cash special dividend, shareholders will benefit from owning a significant interest in a world-class speciality insurance and reinsurance franchise.”

Axis and PartnerRe offered an $11.50 a share sweetener, in the shape of a dividend, to common shareholders in the wake of the all-cash Exor takeover bid.

The would-be partners also said they would seek a private letter ruling from the US tax authority the IRS that an exchange offer to preferred shareholders, which matches Exor’s offer of a 100 basis point increase in the current dividend rate, would not expose preferred shareholders to tough IRS rules on tax shelter transactions.

Axis CEO Albert Benchimol said: “The combined company will have the scale, the product reach and the service capabilities to add substantial value and deepen our relationships with clients and distribution partners.”

Exor raised its original $6.4 billion bid for PartnerRe — equivalent to $130 a share — to $6.8 billion, or $137.50 a share, in May.

The cash deal went up against the all-share merger proposition and Exor said it intended to retain PartnerRe as a stand-alone company and keep existing management and staff.

The Axis-PartnerRe deal would create the world’s fifth largest reinsurer and the two companies have said joining forces would save $200 million a year — with some of the savings from redundancies among the combined Bermuda-based staff of around 130.

And the two reinsurance firms, near-neighbours on Pitts Bay Road in Pembroke, would also probably require less office space.