Nippon Life Insurance Co is in talks to buy Mitsui Life Insurance Co, people familiar with the matter said, in what would be the first major realignment in Japan's life insurance market in 11 years.

A deal would push Nippon Life, Japan's No. 2 insurer by revenues, ahead of industry leader Dai-Ichi Life Insurance Co as competition heats up with the Nov. 4 listing of Japan Post Insurance Co as part of the sale of government-owned Japan Post Holdings Co.

Nippon Life is set to buy two-thirds to 80 percent of Mitsui Life from Sumitomo Mitsui Banking Corp and other leading shareholders, business daily Nikkei and public broadcaster NHK reported.

The talks are centred on a Mitsui Life valuation around 400 billion ($3.3 billion), based on the values of listed insurers, one source told Reuters.

Nippon Life hopes to complete the deal, to be announced as early as next month, by the end of March, Nikkei said. Insurance policies would be left untouched, so policyholders should not be affected significantly, it said.

Nippon Life, overtaken last year in size by Dai-Ichi, is seeking to shore up its domestic sales base as Japan's population shrinks.

Mitsui Life received 160 billion yen in financial support from investment funds and Mitsui group companies from 2006 to 2008, Nikkei said.