Toronto-based Intact Financial Corp. says it has reached a US$1.7-billion deal to buy OneBeacon Insurance Group, Ltd., a U.S. specialty insurer.

Under the terms of the all-cash deal, OneBeacon shareholders will receive US$18.10 cash per common share, a 14% premium based on OneBeacon’s closing stock price on the NYSE of US$15.89 as of May 1, and a 15% premium to the volume weighted average price over the last 30 days.

In addition, OneBeacon debt of approximately US$275 million will remain outstanding.

Pending approval by OneBeacon’s shareholders, Toronto-based Intact says the acquisition will make it a North American leader in specialty insurance with more than C$2 billion of annual premiums.

Intact says the deal will bolster its Canadian business with new products and cross-border capabilities, and better positions Intact to compete with international insurers.