RSA Insurance said it was willing to back a £5.6 billion takeover bid from Swiss rival Zurich after its suitor put forward a proposed offer.
RSA said Zurich had made a revised approach worth 550p a share, which came just hours before a 5pm deadline for Zurich to make a firm offer or walk away under takeover rules.
RSA has now asked for the British Takeover Panel to extend the deadline until 22 September as they hammer out a formal deal.
Details of the proposed bid comes after Zurich recently insisted it would not overpay for RSA.
But a price of 550p a share will no doubt come as a relief to investors after speculation Zurich was working on a lower-than-expected offer of under 530p a share.
RSA said its board had "indicated to Zurich that it would be willing to recommend an offer at the level of the possible offer to RSA shareholders".
Shareholders will also receive the dividend payout worth 3.5p a share if the takeover goes ahead, lifting the overall price to £5.63 billion.
Insurance expert Eamonn Flanagan at Shore Capital said a takeover for RSA was now "inevitable".
But he added a rival offer was still possible "from another Continental European insurer".
RSA sells insurance in the Irish consumer market as 123.ie.
Zurich also separately confirmed its proposed bid, but added there was still no assurance that a firm offer will be made.
The European insurance giant said on posting interim results earlier this month that it saw "significant benefits" from a takeover of RSA, but added that "any capital deployment would need to meet the same hurdles that we apply to any other investment".
RSA is run by chief executive Stephen Hester, the former boss at Royal Bank of Scotland who was hired to revive the insurer's fortunes after it was hit by a series of profit warnings and the uncovering of a £200 million black hole in RSA's Irish division more than 18 months ago.
Half-year results from RSA earlier this month showed group operating profits rose 84% to a better-than-expected £259 million compared to a year ago, driven by higher underwriting profits, fewer weather-related claims and stable investment income.
The insurer said its underwriting profits in Britain were at their highest since 2006 due to a more disciplined approach and hit a 10-year record at its sizeable Canadian business.
The figures signalled the turnaround under Mr Hester, who took over at RSA from his predecessor Simon Lee, was making progress after tough actions have been taken, including the sale of a clutch of assets, sweeping changes to the management team and a £775 million rights issue to rebuild the group's balance sheet.
Over the last six months, RSA has sold businesses in Hong Kong, Singapore, India and China. It also announced the disposal of its British engineering inspection business, bringing its total agreed disposals to £835 million over the last 18 months.