Sun Life Assurance, the Canadian life assurance group, has confirmed it is developing a demutualisation strategy under which it would become a publicly traded company, which industry observers estimated could have a market capitalisation of Can$10 billion (£5 billion).

It would be the third Canadian insurance group to demutualise, joining a global trend that has seen insurance companies in the UK, Australia and South Africa go public in order to improve their ability to raise capital.

Demutualisation would be a bonanza for Sun Life's one million participating policyholders, who would receive shares in exchange for giving up their voting rights and entitlement to the group's Can$5.5 billion surplus.

Some 40 per cent of participating policyholders are in Canada, 20 per cent in the UK, 25 per cent in Asia and 15 per cent in the US, according to one study.

Sun Life also has a small presence in the Irish insurance market with just 0.38 per cent of 1996 life and pensions business, according to Irish Insurance Federation figures.

The exact number of customers in Ireland is not known.

Irish customers who have with profits and investment policies with Sun Life would also qualify for any free share issue.

Based on estimated market capitalisation, eligible policyholders would receive shares worth an average of Can$10,000 (£5,000).

But analysts said the actual value of shares given to participating policyholders would depend on how the company valued itself, as well as the amount of each participant's policy and the premiums they had already contributed.