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U.S. insurer Chubb is in talks to acquire a 49% stake in India's Kotak General Insurance and has become a more favoured suitor than Zurich Insurance Group, two people with direct knowledge of the discussions said.

Chubb has an edge over Zurich because it is more amenable to leaving control with India's Kotak Mahindra Bank and because Kotak believes it shares more common business areas with Chubb such as auto insurance, according to one of the people.

Zurich has been discussing a stake of either 49% or 51% and the majority stake would likely value the company at around $800 million, the sources have previously said.

But if Chubb were to win out, the deal would value Kotak at less than $800 million as it would not include a so-called buyout premium, they said.

Kotak, one of India's smaller general insurance firms, has been looking to sell a stake to achieve faster growth in a market seen as having huge potential. It is controlled by Uday Kotak, who is Asia's richest banker worth $14 billion according to Forbes.

Kotak General Insurance continues to have discussions with Zurich, though separate talks with private equity firm Carlyle have not worked out, the people added.

They were not authorised to speak to media and declined to be identified.

Chubb and Kotak did not respond to Reuters queries seeking comment. Zurich and Carlyle declined to comment.

Chubb, the world's biggest property and casualty insurer, operates in 54 countries and has nearly $200 billion in assets.

A deal with Kotak would mark a fresh attempt by Chubb to foray into the Indian market after a deal with HDFC General Insurance ended in 2007.

In India, general insurance products such as those for healthcare are usually bought for tax deductions.

The world's most populous country has huge potential as an insurance market with non-life insurance penetration of 1% in 2021 compared with the global average of 4.1%, according to Indian credit ratings firm CareEdge.

Annual premium collections in India's general insurance market grew 11% to $26.7 billion in the year ended March 2022, CareEdge said, adding that it expects annual growth of 13-15% in the medium term.

Heightened risk awareness in the wake of the COVID-19 pandemic is also driving demand.

Foreign companies such as Germany's Allianz and South Africa's Lombard have general insurance partnerships with Indian banking or financial groups. India in 2021 relaxed investment rules for the sector, allowing foreign companies to acquire stakes of up to 74%, compared with up to 49% earlier.