Swiss Re is in talks to buy the life-assurance arm of Barclays, a division that has more than £7 billion under management.

It is understood that the Swiss giant, one of the world’s largest insurers, is conducting due diligence on the business, and could complete a deal in weeks.

More than 70,000 policyholders a month have their pension paid by Barclays Life Assurance, which looks after their life, pension, and investment plans.

The business was created in 2003 when Woolwich Life and Barclays Life were merged, two years after the parent companies had combined.

However, they had both stopped accepting new customers in 2001 and instead began a “banc-assurance” alliance with Legal & General. By 2004 Barclays Life Assurance had more than 1m policyholders on its books.

As the division no longer writes new business, Barclays sees it as a non-core operation and an opportunity to raise cash through a sale.

Market sources differ greatly as to how much Swiss Re is likely to pay for Barclays Life Assurance. Initially, it was thought to be worth £1 billion on an embedded-value basis but estimates now vary from as little as £400m to £750m.

Bankers say a loan from Barclays to the business has confused its true value and if the two sides are too far apart on price a deal may not go ahead. Barclays maintains it is “reviewing its options”.

Premiums received by Barclays Life in 2007 were over £352m.

The possible deal follows a flurry of consolidation in the life-book sector, which culminated in last year’s £5 billion takeover of Clive Cowdery’s Resolution group by rival Pearl after a fierce tussle.

Specialist buyers increase the returns of life books or “zombie funds” by putting the liabilities together and stripping out administrative costs.

Swiss Re has been one of the most prominent and acquisitive players in the sector. It has a special unit to buy closed-life books called Admin Re. Last year Swiss Re failed in a counter-bid for Resolution.

A year ago the Swiss insurer bought a zombie fund from rival Zurich Financial Services that had nearly £4 billion under management.

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