Hartford's offer of $70 per share represents a premium of 9 percent to Navigators' Tuesday close. Navigators' shares were trading at $70.50, indicating that investors were seeking a higher offer.
"Navigators does have a lot of structural things that make it look attractive to not just one acquirer but a lot of acquirers," said Paul Newsome, analyst at Sandler O'Neill & Partners.
"The markets are telling us that someone can come and give investors higher than what Hartford is offering," he said.
Navigators Group provides insurance services to marine, construction and energy industries, among other things, and has operations in 22 U.S. states.
In addition to an established presence at Lloyd's, Navigators also has growing underwriting operations in Europe, Asia and Latin America.
Hartford said it had sufficient resources to fund the deal, and does not plan to offer shares in connection with the acquisition.
The deal, expected to close in the first half of 2019, may slightly reduce Hartford's 2019 earnings, but add between $30 million and $75 million to its net income in 2020, the company said.
Citigroup Global Markets Inc was lead financial adviser to Hartford, with Deutsche Bank Securities Inc. Mayer Brown provided legal counsel to Hartford.