Transatlantic Holdings Inc and Allied World Assurance Co Holdings said on Sunday they will merge to create a premier global specialty insurance and reinsurance company.

The transaction is structured as a merger of equals, with shareholders of Transatlantic receiving 0.88 Allied World common share for each Transatlantic common share held, the companies said in a joint statement.

Following the merger, Transatlantic shareholders will own about 58 percent of the combined company on a fully diluted basis, with Allied World shareholders owning around 42 percent.

Both companies' boards of directors have approved the transaction and expect a fourth-quarter closing.

The deal is subject to shareholder and regulatory approval.

(Reporting by Nadia Damouni; Editing by Dale Hudson)