(Adds comment from lawyer)
By Eveline Danubrata and Saeed Azhar
JAKARTA/SINGAPORE, May 16 (Reuters) - Indonesia's Gunawan family is weighing the sale of as much as an 80 percent stake in its general insurance business, PT Asuransi Multi Artha Guna , to Canada's Fairfax Financial Holdings, sources familiar with the matter said.
The family is working with a Western investment bank on the deal, which could fetch a significant premium over the insurer's current price-to-book multiple of around 1.2 times based on Thomson Reuters data, the sources said.
PT Asuransi's market capitalization is $132 million.
The Indonesian company and Fairfax, led by Canadian investor Prem Watsa, did not respond to requests for comment. The sources asked not be identified because the discussion is not public.
The potential transaction is a sign of growing foreign interest in the general insurance market after a string of deals in the life insurance segment in Asia's tenth biggest insurance market.
"Typically the non-life market follows the life market in development, so, after many years of focus on the life sector, the Indonesian general insurance sector is ripe for expansion," said Anna Tipping, partner at law firm Norton Rose Fulbright (Asia) LLP in Singapore.
She said challenges for gaining traction in the Indonesian market include low per capita incomes. Most retail insurance products fall into the micro category so distribution and servicing costs must be kept to a minimum.
Fairfax is very active in both the insurance sector and in Asia. It owns partial or full stakes in about 22 insurance and reinsurance companies, according to its website. That includes PT Fairfax Insurance Indonesia, which was acquired about two years ago.
Bloomberg reported the news earlier on Monday. (With additional reporting by Matt Scuffham and John Tilak in Toronto; Editing by Bernard Orr)