FBD Holdings has agreed a deal to buy and cancel the €70m 7% convertible notes currently held by Fairfax Financial Holdings Limited for about €86m in cash.
The company said this will be funded through a combination of existing cash resources and a new issue of subordinated notes.
As part of the deal, FBD said it will issue €50m of new "Callable Dated Deferrable Subordinated Notes" which will be due in 2028.
In 2015, FBD had issued the notes to Fairfax to strengthen its capital position ahead of the implementation of new regulations and to position it for future growth.
FBD's chief executive Fiona Muldoon said the transaction is a great result for the company's "loyal shareholders".
Ms Muldoon said it avoids any dilution of shareholders' existing shareholdings and ensures that FBD continues to maintain a very strong capital position.
"Fairfax's investment in 2015 was a meaningful endorsement of our business when we needed it and they have been a fantastic partner," she said.
"The staff, management team and I look forward to continuing to grow FBD as the only indigenous Irish insurer and to expanding our business in both urban and rural Ireland," she added.
Shares in the company moved higher in Dublin trade today.