Switzerland’s Zurich Insurance Group has agreed to buy Australia’s biggest travel insurance provider, Cover-More Group, for A$741 million ($551 million), stepping up its investment in the Australian market.

Global buyers have been drawn to the broader Australian insurance sector, where returns on equity are healthy and banks have been selling insurance assets due in part to regulatory changes requiring them to hold more capital.

Zurich had already bolstered its presence in Australia in March through the purchase Macquarie Group’s life insurance division for an undisclosed sum.

Other recent transactions include National Australia Bank’s sale of 80 percent its life insurance division to Nippon Life for A$2.4 billion in October.

Cover-More shares surged 43 percent to A$1.875 on Monday after Zurich’s A$1.95 cash a share offer, a 48 percent premium to the target’s last closing price of A$1.32 on Friday.

The company floated by private equity firm Crescent Capital in December 2013 at A$2 a share.

Noel Webster, a senior portfolio manager at BT Investment Management, which owns 5.7 percent of Cover-More, said the premium appeared reasonable but there was potential for a counter-bid.

“Maybe this draws attention to the fact that there is quite good market share and global positioning,” Webster told Reuters.

Cover-More Chief Executive Officer Mike Emmett said the company had not run an auction process after receiving an unsolicited approach from Zurich.

The Swiss insurer had been able to access confidential information when competing for a separate underwriting contract won last week by Warren Buffett’s Berkshire Hathaway Inc , he added.

“From now until closing by definition anyone else can come forward with a bid,” Emmett told Reuters. “The board has a fiduciary responsibility to evaluate every bid.”

Bell Potter analyst John O’Shea said Cover-More was appealing as a growth business given increasing outbound travel volumes in Australia, driven in part by low airfares.

The company has a 40 percent share of the Australian travel insurance market, and as of the end of September, outbound travel was growing by 4.8 percent a year, according to the Australian Bureau of Statistics.

Australia’s second largest travel insurer, Allianz , has a 25 percent share of the market, according to research firm IBISWorld, while Suncorp and QBE Insurance Group each hold around 6 percent.

Cover-More Chairman Louis Carroll said Zurich planned to operate Cover-More as a discrete business and retain the existing management team.

The deal will be executed via a scheme of arrangement requiring the approval of 75 percent of Cover-More shareholders at a meeting the insurer said was expected to be held by early April 2017. Zurich has the right to match any competing offers and will receive a 1 percent break fee if the deal does not proceed.

The five-year underwriting deal with Berkshire Hathaway contains a change of control clause that would allow the U.S. giant to exit the contract in the event the Zurich bid is successful, a Cover-More spokesman said. Zurich would become the underwriter if that occurred, he added. ($1 = 1.3444 Australian dollars)

Topics Mergers & Acquisitions Carriers Australia