UPDATE 1-Zurich says weighing up bid for British insurer RSA

(Corrects 8th paragraph to show Hester came from RBS (LSE: RBS.L - news) , not Barclays (LSE: BARC.L - news) )

* Market talk of 5.5 bln stg bid

* RSA declines to comment

* Comes amid consolidation in broader industry

By Katharina Bart and Simon Jessop

ZURICH/LONDON, July 28 (Reuters) - Zurich Insurance (Xetra: ZFI1.DE - news) said on Tuesday it was weighing up a bid for British $7 billion rival RSA Insurance Group, in what would be the latest industry consolidation amid toughening regulations.

The impending launch of new European rules governing how much money an insurer needs to keep in reserve to protect against future market shocks, has already prompted some deals to diversify revenue streams, and more are expected.

Amid increased market speculation over recent days, the Swiss-based Zurich, a 45 billion Swiss franc company offering a range of life and general insurance products, said it was looking at making a bid.

"Zurich notes the recent market speculation in relation to RSA Insurance Group PLC and confirms that the company is evaluating a potential offer," the Swiss insurer said in a brief statement on Tuesday.

"This announcement does not amount to a firm intention to make an offer and there can be no assurance that any offer will be made."

Zurich was reportedly considering a bid valuing RSA at 5.5 billion pounds, or 550 pence a share, the Financial Times said.

RSA, which has a market capitalization of 4.4 billion pounds ($6.85 billion), declined to comment when contacted by Reuters.

After suffering multiple profit warnings, fuelled in part by an accounting scandal in Ireland (Other OTC: IRLD - news) , the British firm hired ex-RBS boss Stephen Hester to lead a turnaround effort.

At its most recent results, the company posted a 1 percent rise in net written premiums and said profits were ahead of plans, boosted by a series of disposals.

Earlier this month, the company appointed a new chief financial officer from Towergate Insurance. He is due to start work in the fourth quarter.

Commenting on the talk, Shore Capital analyst Eamonn Flanagan said "Zurich has surplus capital it wishes to deploy and has looked at RSA in the past, we believe." ($1 = 0.6420 pounds) (Editing by Richard Pullin and Sinead Cruise)