Insurance Australia Group Limited (IAG) has agreed to sell all its Equity Red Star business in UK to private equity firm Aquiline Capital Partners for $A130m ($130m).

Commercial insurance broker, Independent Commercial Brokers, will be sold to a consortium led by its existing management team, with the details still to be confirmed.

The company had been reviewing its loss-making operations in the UK for months.

The Group expects to incur a net loss after tax of approximately $240 million in respect of the UK business in the financial year 2013.

As part of the sale agreement the existing pension fund liabilities will remain with IAG.

IAG managing director and CEO, Mike Wilkins, said all options for the UK business had been investigated, including continuing to focus on improving the business’ performance within the current operating model and refining the business’ strategy to a more focused specialist motor offering.

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Wilkins added: "We believe the sale option delivers the best available outcome for IAG shareholders, particularly in light of the continuing challenging economic and industry conditions in the UK market."