MILAN, Oct 23 (Reuters) - Shares in Italy's Unipol fell sharply on Wednesday after the insurer disclosed a July 25 letter sent by industry regulator IVASS calling on it to cut its large structured derivatives portfolio.
Unipol, which is slated to merge with peer Fondiaria-SAI later this year, published the IVASS letter late on Tuesday following a request from market regulator Consob.
In its letter, IVASS said Unipol should "seize in a timely fashion any market opportunities to simplify and slim down its structured product portfolio."
IVASS's request was one of several it made to Unipol when it approved its merger with Fondiaria-SAI on July 25.
Unipol said earlier in October its structured products totalled 5.2 billion euros ($7.17 billion) at the end of June.
Some analysts have previously expressed concern about the size of the portfolio.
"Some market players are selling (Unipol shares) on the IVASS request, that emerged today, to reduce its derivatives portfolio," an analyst said.
Unipol shares ended the session down 5 percent while the European insurance sector was down 0.24 percent.
Unipol cut by 510 million euros its derivatives portfolio in the first half of the year. Of these, 197 million euros were complex structured products, the company has said.
Shareholders at the Fondiaria-SAI group, which includes parent company Premafin and listed subsidiary Milano Assicurazioni, meet on Friday to approve the merger with Unipol Assicurazioni.
The new group, which will be called Unipol Sai, will be Italy's second-biggest insurer behind Assicurazioni Generali .
$1 = 0.7256 euros Reporting by Stephen Jewkes and Andrea Mandala; editing by David Evans