Exor, the investment vehicle of Italy's Agnelli family, said on Sunday that talks over an all-cash deal were ongoing and there was no certainty they would result in a transaction. It did not give further details.

The group, led by Agnelli scion John Elkann, completed the $6.9 billion acquisition of PartnerRe in 2016, after a long, hostile takeover battle.

The deal was the group's single biggest investment and a key step in diversifying the family's portfolio.

Talks between Exor and co-operative insurer Covea were first reported by the Insurance Insider website.

The source said Exor, which also controls sports car maker Ferrari and industrial machinery firm CNH, was interested in the deal because it would help accelerate PartnerRe's strategy in a consolidating sector and would also offer an good premium on Exor's investment.

Insurers are turning to acquisitions, also in reinsurance, to strengthen their businesses as they face tougher regulation and falling returns from financial market investments.

"Nothing concrete is expected in the coming days but such talks normally do not go on for months," the source said.

The source added that the tie-up would not lead to any overlaps between the two companies and would create the world's third largest reinsurer by assets.

A Covea spokesman confirmed the talks, without giving any further details.

Unlisted Covea, one of France's top damage and property insurance companies, last year dropped a bid to buy local reinsurer SCOR.

Covea's Chief Executive Thierry Derez said at the time the company was seeking to acquire another reinsurer.

Branching out to reinsurance would also allow Covea to diversify outside its main market France, where it makes almost 90% of its 17 billion euros ($19 billion) business.

Fiat Chrysler is in the midst of merging with France's PSA Group.

(Reporting by Giulio Piovaccari; Additional reporting by Sarah White in Paris; Writing by Giulia Segreti; Editing by Mark Potter and Ros Russell)