The recent £22.3 billion takeover of Halifax Bank of Scotland by Lloyds TSB will lead to the emergence of an insurance giant in the life insurance industry, analysts have suggested.

Following the merger, which provided a last minute life-line for HBOS, the two leading bank’s also merged their separate life insurance strands.

Analysts believe Scottish Widows, Lloyds’ subsidiary, and HBOS’s Clerical Medical merger would lead to the emergence of an insurance firm with up to 18 per cent share of the UK life and pension market.

They also warned that this could result in a serious competition as the new firm would constitute a major threat to other insurance firms in Edinburgh and London.

Reports said the merged firm and its combined asset management business, estimated at about £200 billion, would be located in Edinburgh. And the insurance and investment businesses would all adopt the Scottish Widows brand and relocate most of their operations to Edinburgh as soon as the take is completed.