Transatlantic’s largest shareholder will oppose the merger with Allied World, paving the way for Validus and National Indemnity.

Transatlantic shareholders are due to vote on the Allied World merger on 20 September in an extraordinary board meeting.

But according to a filing with the Securities and Exchange Commission, Davis Selected Advisors, which owns 23.6% of Transatlantic, said the current Allied World offer did not maximise value for shareholders.

"Davis Advisers believes that the current offer from Allied World Assurance Company Holdings is not in the best interest of maximizing value for shareholders," Davis said in a filing with the U.S. Securities and Exchange Commission on Wednesday.

Because of an agreement with New York insurance regulators, the firm can only vote a 9.9 percent stake freely and has to vote its remaining shares in proportion to the votes of other shareholders.

A merger deal between Allied World and Transatlantic was agreed upon on 12 June, but Ed Noonan’s Validus stepped in with a counter offer in July and Warren Buffett’s National Indemnity offered a third option in August.

Validus has taken its offer directly to shareholders while Buffett is believed to be in negotiations with Transatlantic.