April 7 (Bloomberg) -- Insurance Australia Group Ltd., the nation's largest car and home insurer, may pay about $250 million for almost a quarter of China Pacific Insurance Co.'s property unit, people familiar with the plan said.

Insurance Australia of Sydney values all of China Pacific's property insurance business at more than $1 billion, said the people, who declined to be identified. Insurance Australia Chief Executive Officer Michael Hawker, 45, is seeking to expand overseas as earnings growth slows.

China is allowing greater access to its insurance market to meet World Trade Organization pledges and reduce the burden on a government that provides benefits to millions of workers at state- owned companies. Foreign insurers are trying to get a slice of a $13 billion property-and-auto insurance market that increased 25 percent last year.

``China represents a growth opportunity,'' said Atul Lele, who helps oversee $500 million at White Funds Management in Sydney. The nation's overall insurance market, worth $52 billion, will grow as much as 25 percent in each of the next five years, Boston Consulting Group Inc. forecasts.

Insurance Australia told the Australian Stock Exchange in February that it was in talks with Shanghai-based China Pacific. ``We have nothing further to add to our statement in February,'' said Insurance Australia spokeswoman Emma Foster. Jing Ben, secretary to China Pacific's board, couldn't be reached for comment as calls to her office weren't answered.

China currently limits foreign ownership of an insurer to 25 percent. In December, the government ended geographical restrictions, allowing overseas insurers to expand throughout China, as it encourages more of the nation's 1.3 billion people to buy private insurance.

Changing Market

China Pacific faces increasing competition after the government allowed property insurers to set their own rates for auto policies starting in 2003. A partnership with Insurance Australia may help cut underwriting costs and improve the handling of claims, said Andrew Waddington, who helps manage about $30 billion at BT Financial Group in Sydney.

China Pacific controlled 12 percent of the property insurance market in 2004, according to figures from the China Insurance Regulatory Commission. China Pacific agreed last year to sell 24.9 percent of its life insurance unit to U.S. buyout firm Carlyle Group and Prudential Financial Inc., the third- largest U.S. life insurer, for $400 million.

PICC Property & Casualty Co., China's biggest property insurer, sold a 10 percent stake in 2003 to American International Group Inc., the world's biggest insurer, for $254 million. Shares of PICC Property have gained 40 percent since the company went public in November 2003.

To contact the reporter on this story: Cathy Chan in Hong Kong at kchan14@bloomberg.net.

Last Updated: April 6, 2005 12:05 EDT