(Corrects paragraph 1 to say "Dublin-based" instead of"Bermuda-based")
Jan 9 (Reuters) - XL Group Plc will buy underwriterCatlin Group Ltd for about 2.79 billion pounds ($4.22billion), giving the Dublin-based insurer and reinsurer a biggerchunk of the Lloyd's of London market.
The offer of 388 pence in cash and 0.13 new XL share valueseach Catlin share at about 715.3 pence - a premium of 8.3percent to the stock's close on Thursday.
Shares in Catlin, the biggest syndicate on the Lloyd's underwriting floor, were trading at 690 pence in late morningbusiness on the London Stock Exchange.
XL Group's shares were untraded before the bell in New Yorkafter closing at $35.42 on Thursday. The company' shares fell asmuch as 4 percent in December when news of its interest inCatlin emerged but they have since recovered.
Catlin, which sells insurance for everything from floodingto kidnapping and is also headquartered in Bermuda, will pay afinal dividend of 22 pence, reversing an earlier decision toforego the payout after the approach from XLGroup.
At that time, XL Group - which has a market value of morethan $9 billion - had offered 2.53 billion pounds for Catlin.
"This bid both highlights the attractions of Lloyd's forexternal players and increases the scarcity value for theremaining companies," Shore Capital analyst Eamonn Flanagan saidin a research note.
Incoming stricter capital rules for European insurers havespurred deal activity in the industry.
Earlier this week, brokerage Westhouse Securities flaggedNovae Group Plc and Lancashire Holdings Ltd asthe next possible targets. ($1 = 0.6612 pounds) (Reporting by Richa Naidu in Bengaluru; Editing by SavioD'Souza and Ted Kerr)