The topic of mergers and acquisitions at Lloyd’s of London has been often debated, as the soft market seemed to have created ripe M&A conditions.

Now, with recent catastrophes, rates are “firming fast,” Eppinger says. He adds that typically, M&A activity normally occurs within the last couple of soft market years and the first few years of market hardening.

Nevertheless, Hanover’s attempt at buying Chaucer—a leading Lloyd’s specialist insurer—was motivated more by the recognition that Chaucer was a “wonderful counterparty” to Worcester, Mass.-based Hanover’s desire to grow specialty lines as part of a master plan initiated about seven years ago, Eppinger says.

“I like their portfolio,” Eppinger says of Chaucer, which underwrites international global marine, energy, non-marine and aviation risks, as well as motor vehicle and nuclear business in the United Kingdom.

“We have complimentary capabilities,” he adds. “I like the situation. This gives us both more financial opportunities.”

For this reason, Eppinger says, he predicts there will be minimal integration challenges.

“There is not a lot of overlap,” he says. “There’s no risk of smashing two things together.”

The companies are expected to take advantage of new cross-selling chances. Hanover, which provides products to individuals, homes, and business, gets access to Lloyd’s. Chaucer can access Hanover’s specialty segment through its independent agents and brokers in the U.S.

Chaucer CEO Robert Stuchbery plans to stay on board. So will the talent Chaucer brings to the table, which was a big part of the acquisition value, adds Eppinger.

Eppinger says he is confident the purchase price will be accepted by enough Chaucer shareholders. Chaucer’s board of directors and some of its large shareholders have approved, but one shareholder says the $510 million offer is inadequate.

“I’m very confident this is a fair deal,” for Hanover and Chaucer investors, Eppinger says. “Historically in London, when you have the support we have, it goes through. The email traffic has been nice—so positive.”

The chief executive says “you almost have to expect” at least one shareholder group to “agitate for a bigger price.” According to a quarterly report by Advisen, suits filed for breach of fiduciary duty—normally filed after an M&A—drove an increase in first-quarter securities lawsuits.

“It’s almost automatic,” says Eppinger, who clarifies that Hanover doesn’t need approval from 75 percent of Chaucer shareholders, as has been reported, for the deal to go through. It needs 75 percent approval from the Chaucer shareholders that vote.

Hanover says it plans to finance the purchase with cash, and about $250 million of new senior debt.

The acquisition should be neutral to modestly beneficial to Hanover’s earnings in 2011, and have a more meaningful impact on earnings and return on equity in 2012, according to Eppinger.