Rebound in insurance stocks lifts UK's FTSE

* FTSE 100 up 0.2 percent in late session trading

* Standard Life (LSE: SL.L - news) surges after Ignis AM deal

* Lloyds falls as UK government cuts stake

By Sudip Kar-Gupta

LONDON, March 26 (Reuters) - A rebound in blue chip insurance stocks boosted by business deals announced by Standard Life and Legal & General (LSE: LGEN.L - news) pushed Britain's top equity index to its highest level in around two weeks on Wednesday.

The FTSE 100 index advanced by 0.2 percent, or 14.30 points, to 6,619.19 points in late-session trading.

The insurance sector fell sharply last week after the British government scrapped a requirement that pensions savings should be used to buy an annuity, dealing a potential blow to insurers' future profits.

However, the sector recovered on Wednesday, led by Standard Life, which surged 5.9 percent to the top of the FTSE's leaderboard after the company said it was acquiring Ignis Asset Management, and L&G, which rose 2.7 percent after winning a contract with the ICI Pension Fund.

"The insurers got hit last week by the new pension arrangements, but we're now seeing them recover. The Ignis deal does help Standard Life strengthen its grip on the UK market," said Edmund Shing, global equity fund manager at BCS Asset Management.

LLOYDS FALLS

A 5 percent fall in Lloyds Banking Group curbed the FTSE's progress after the British government sold a 4.2 billion pound stake in the bank at a 4.6 percent discount to Lloyds' closing share price on Tuesday.

Although many traders and investors expect the FTSE to hit a record high of 7,000 points later this year, Logic Investments' director Darren Easton felt the FTSE's gains in the near term looked relatively limited.

The FTSE, which rose 14.4 percent in 2013 to post its best annual gain since 2009, has failed to break above the 6,900 point level so far this year and is down by around 2 percent since the start of 2014.

Easton said he had bought positions in the FTSE for clients last week at the 6,560-point level but had started to trim back those holdings at the 6,640 level.

"We're not saying we're not going to go any higher, but we're just reducing our risk on the upside," he said. (Additional reporting by Francesco Canepa; Editing by Sonya Hepinstall)